With increasing frequency comments on the ongoing sovereign debt crisis in Greece and the euro zone include a reference to the need to avoid a repeat of the collapse of the investment bank Lehman Brothers in September 2008. The basis for this otherwise puzzling comparison is the concept of “contagion,” that is, cascading failures in the financial sector – the “falling dominos scenario” – which once started with a single “event” cannot be halted, by any means currently at our disposal, until other (perhaps many other) large losses occur.

Full post here: Catastrophic Failures in Risk Management 2 [PDF]