Book Review (Clark et al. 2009)

Managing Financial Risk: From Global to Local

Managing Financial Risk: From Global to Local

Gordon L. Clark, Adam D. Dixon and Ashby H.B Monk (eds)

Oxford University Press 2009 (ISBN 0199557438). £55 (hbk)

Review by Ben Spigel, PhD Candidate, Department of Geography, University of Toronto (20 July 2010)

Financial geography is a critical tool in understanding the causes and consequences of the current global financial crisis. Even before the crisis, financial geography was an increasingly popular field for studying the complex financial and political ties between governments, organizations, consumers and workers. Managing Financial Risks contributes to this growing discussion of financial geography by focusing the geographies of financial risk. It contributes to both research on global economic activity itself as well as how this activity transcends a variety of scales. The book is useful to financial geographers reviewing new developments in the study of risk as well as newcomers to the field who need an introductory guide to the geographies of financial crises and risk.

In four sections, the book examines financial risk on global, national, urban and individual scales. The first section deals with global financial risk. This section provides the best analysis of global financial crises, with a particularly useful chapter by Gary Dymski chronicling the links between the rise of neoliberal economic practices and the increased tempo of economic crises. This chapter is useful for advanced undergraduate or graduate classes needing a concise overview of post-war economic crises. Gordon Clark’s chapter in this section introduces concepts of behavioral economics and psychology to better understand how institutional investors make non-economically rational decisions. Clark argues that by understanding the institutional and cultural ‘ecology’ of large investors like pension funds we can better understand the underlying logic of global financial markets.

The second section deals with risk at national, sub-national and corporate scales. While this is the book’s least thematically cohesive section, the chapters themselves offer interesting geographical perspectives on the construction of risk and risk markets. Of particular interest to many economic geographers are chapters by Ewald Engelen and Dariusz Wójcik both of which study how physical proximity affects how investors understand and manage risky investments. While both these chapters are useful contributions in understanding how the distance between an investor and an investment affects how risk is judged, they would have benefitted from a deeper engagement with prior works that emphasize the importance of cognitive, cultural and organizational proximity along with spatial proximity in knowledge creation and learning (e.g Amin and Cohendet, 2004; Asheim et al., 2007; Torre, 2008).

The third section focuses on risk at the regional scale. The first two chapters in the section deal with municipal and infrastructure bonds, two elements of financial risk that are likely to become even more critical to global financial networks. The third chapter in the section, by Samuel Randalls, examines with how risk is constructed at an urban level. This includes both actuarial definitions of risk, such as the chances of a flood, earthquake or hurricane affecting a region as well as new types of financial instruments that, for example, allow agents to place bets on the number of high-heat days in a city. The ties between the attributes of a specific place and complex financial instruments are an interesting avenue for critical investigation.

The final section addresses risk on the individual level. Susan Smith relates a fascinating story about the creation of a new financial market. Her history of the UK housing derivatives market shows that far from being a natural and rational example of economic rules, it was a product of its time, its context and of a few specific actors who pushed for it. Kendra Stauss’ chapter argues that pension planning is inherently gendered, as women are more likely to work in lower-waged, lower-skilled jobs that do not provide pensions, and that even for those women who do have pensions are at a disadvantage due to time taken off for maternal leave. The final chapter of the book, by Paul Langley, takes a Foucauldian view of consumer credit, tracing how the disciplining forces of the modern economy force consumers to take on different forms of financial risk.

The choice to organize the book based on four different scales was a good one. The strong conceptual links between each section’s chapters adds to their collective argument. However, there are few connections between sections, which is disappointing given the multi-scalar argument the editors laid out in the introduction. A concluding chapter could have summarized the various points made throughout the book and showed how activities on individual, regional, national and global scales interact to construct financial risk.

The timing of this book is both its greatest strength and its greatest weakness. Managing Financial Risk comes out at a critical moment, as research agendas are being formed to study the contours of the present international financial crisis. The book’s timing makes it a useful intervention within financial geography. But its timing also means that many of the chapters were researched and written before the start of the financial crisis. The editors acknowledge this in their introduction, and several of the chapters were updated to address the events of the recent years. However, this raises an important question: is research on the global economy carried out before the crisis still relevant?

I believe this book shows that such research does remain relevant, as long as it is updated to address recent events. For example, Phillip O’Neill’s chapter on risk management in an Australian bank reviews how corporate strategy at the bank reduced their exposure to urban risk during the crisis. On the other hand, Millo and MacKenize’s chapter on the social history of the Black-Scholes-Merton options pricing model lacks a discussion updating their historical analysis to include recent events. This is not to say that research that does not focus on the events of 2007 and 2008 is now worthless, but rather that recent work on global finance needs to be reevaluated in light of recent events.


Amin, A. and Cohendet, P. (2004). Architectures of Knowledge: Firms, Capabilities, and Communities. Oxford University Press, Oxford, UK.

Asheim, B., Coenen, L., and Vang, J. (2007). Face-to-face, buzz, and knowledge bases: Sociospatial implications for learning, innovation and innovation policy. Environment and Planning C, 25(5):655-670.

Torre, A. (2008). On the role played by temporary geographical proximity in knowledge transmission. Regional Studies, 42(6):869-889.

Buy this book from Amazon.