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The Financial Crisis of 2007–2009: The R...

Allayannis, George...

Case

The Financial Crisis of 2007–2009: The Road to Systemic Risk

Allayannis, George (Yiorgos)

F-1590 | Published July 7, 2009 | 16 pages Case

Collection: Darden School of Business

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This case invites students to evaluate, based on given materials, the causes, consequences, and potential resolutions of the financial crisis of 2007-2009. The premise of a business professor preparing a slide presentation dramatizes an analysis of the financial crisis. Reviewing his data, much of it in graph form, the professor ponders the central role of banks and the impact of risk management, leverage, and incentives. His main thesis is that the fundamental issue surrounding this crisis was the misjudgment of the risks taken, with the result that risk management failed to do its job of curtailing and managing risk as expected.

• To explain the main causes and key consequences of the financial crisis of 2007–09 • To examine potential ways/policy measures for getting out of it • To show the impact of risk management, leverage, and incentives on the crisis • To portray the central role of banks in the crisis