Canada's Next Export: Financial Prudence

The country wants to be a global hub of risk management

By Diane Brady

Mike Cassese/Reuters

Canada: So nice, so boring. And that's a good thing. Throughout the financial crisis, Canada managed to avoid much of the carnage that afflicted the U.S. and Europe. The only headlines it grabbed were those touting its sound banking system and solid economy. "I used to be lucky to get a few [foreign] media requests a year," says Royal Bank of Canada (RY) Chief Executive Officer Gordon Nixon. "Now I get calls every week." RBC is part of a private-public effort to capitalize on Canada's reputation by making Toronto a global hub for financial risk management.

The Global Risk Institute in Financial Services (GRI), set to launch in January 2011, will fund research, train executives, analyze best practices, and bring together experts and policy­makers to discuss risk. To start, the federal and provincial governments will each contribute $10 million Canadian ($9.8 million), with a consortium of private-sector banks, insurers, and institutions together pledging an initial $2.5 million Canadian annually. The goal: become the go-to place for financial risk thinking. "This is our area of strength," says Ontario Finance Minister Dwight Duncan. "Our banking system is the best in the world."

While Toronto currently ranks 12th in the Z/Yen Group's Global Financial Centres Index, which measures competitiveness, it arguably outshines bigger rivals such as New York or London when it comes to risk. "We did not see the extraordinary meltdown of the financial services sector that took place in other parts of the world," says Duncan. "Canada resisted the deregulation of financial services 10 years ago."

GRI is part of a broad push to boost Toronto's reputation as a financial services hub, but GRI spokesman Brian Smith says, "We're not out to proselytize a Canadian way of doing things." What matters, adds Janet Ecker, president of the Toronto Financial Services Alliance, is providing more timely, compelling research to the global business world.

Canada's move comes at a time when governments worldwide are overhauling regulations to reduce risk. Terry Fleming, president of the Risk and Insurance Management Society, a global industry group for risk managers, says the Toronto plan complements those efforts. "Governments recognize the need for better risk management," says Fleming. Companies and boards are putting a higher priority on improving their risk management practices, too.

Whether the institute proves a catalyst for prudent thinking in the global finance world remains to be seen. "Even if it's mostly just good for Canada," says Fleming, "that's a start."

The bottom line: Canada's Global Risk Institute in Financial Services wants to capitalize on the country's reputation for prudent risk management.

Brady is senior editor at Bloomberg Businessweek in New York.

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