Mahfi Eğilmez evaluated the fund crisis: The auditing mechanism should be questioned
Economist Dr. Mahfi Eğilmez addressed the fund crisis using mythological and psychological concepts, drawing attention to inadequate auditing and the failure to see risks in a timely manner.
In an article he wrote, economist Dr. Mahfi Eğilmez evaluated the recently emerged fund crisis through the risks in the financial system and the functioning of auditing mechanisms. Eğilmez emphasized that the crisis must be clarified in all its aspects.
The Auditing Question in the Fund Crisis
Economist Dr. Mahfi Eğilmez stated that the causes of the recent fund crisis are not yet known in all their aspects. He expressed that the main issue to be questioned is the auditing mechanism.
Eğilmez raised critical questions examining whether there was a lack of auditing or whether problems were not addressed in a timely manner despite surfacing.
Financial Risks from Myths
Discussing the figure of Icarus in Greek mythology, Eğilmez stated that high returns in financial markets can alter investors' perception of risk. He noted that as markets rise, taking on more risk can become normalized.
He emphasized that the real danger is not taking risks, but the moment when the risk taken is no longer perceived as a risk at all.
Loss of Trust and Pandora's Box
Drawing attention to the interconnected structure of financial markets through the example of Pandora's box, Eğilmez stated that a problem in one fund can spread to the entire market.
Stating that not only money but also trust is lost in financial crises, Eğilmez expressed that hope alone cannot be a risk management strategy.
Complex Systems and the Tower of Babel
Evaluating the increasing complexity of the financial system with the example of the Tower of Babel, Eğilmez stated that as derivative products and borrowings increase, tracking risks becomes difficult.
He noted that investors, auditors, and fund managers might look at the same structure and see different risks, while the risk carried by the whole might be overlooked.
Rules and the Cobra Effect
Adapting the example of the cobra effect to financial regulations, Eğilmez stated that rules should be examined not only for what they prohibit but also for the behaviors they encourage.
Drawing attention to the fact that a regulation introduced to reduce a risk can create new areas of risk, he argued that having rules is not sufficient on its own.
The Ostrich Effect and the Iceland Example
Explaining the ignoring of risks in the financial system with the ostrich effect, Eğilmez cited Iceland's banking growth prior to the 2008 crisis as an example.
Reminding that precautions were not taken despite warnings within the banking system, Eğilmez emphasized that audit capacity must also increase as the system grows.