Introduction

Ever since Beck’s observation that we live in a “risk society,” the role of risk in structuring the activities of policy-makers and profit-seeking organizations has become ever more prominent. A number of analysts have noted how risk management is a central preoccupation of businesses of all kinds, orienting both their internal activities and their external relations with their “stakeholders.” Indeed to the extent that the phenomenal growth of derivatives and credit default swap (CDS) trading is argued to have been one contributory factor in the global financial crisis of 2007–2009 (GFC), these financial products were sold to so-called “end user” businesses (airlines, commodities producers, etc.) as a risk mitigation strategy. As many have pointed out since the advent of the GFC, the financial services firms who packaged and sold these products appeared less adept at engaging in their own internal risk mitigation processes.

Meanwhile “risk-based regulation” has increasingly captured the imagination of regulators, whether because of directives from politicians – as in the UK – as a response to resource shortages, or because it became synonymous with “smart regulation.” A number of commentators have observed that structuring regulatory activities in terms of a hierarchy of risk requires a different stance from a more traditional regulatory preoccupation with uniform adherence to legal norms. Despite its increasing popularity as a form of meta-regulation, Black and Baldwin point out that the risk-based regulation operationalized by the Financial Services Authority in the UK took part of the blame for a regulatory failure to protect the public during the GFC. The attempt to identify which institutions and activities posed the most risk to the regulatory system with a view to concentrating regulatory effort there does not appear to have worked particularly well in the UK. Despite the lack of a ringing endorsement for contemporary practices of risk-based regulation, the discourse of “systemic risk” has nonetheless emerged as central to the activities of policy-makers and politicians globally in the wake of the financial crisis.