RBI bags Dufrenoy prize for responsible financial innovation

RBI bags Dufrenoy prize for responsible financial innovation.

CDOs and the Dimensions of RI???

In recent months I have been pondering the extent to which the dimensions of responsible innovation mentioned in earlier posts were considered in the development of CDOs. The focus on this particular financial innovation derives from its recent classification as toxic and major contribution to the 2007/2008 financial crisis. Despite the lack of secondary data available on the details of the innovation process, the financial crisis inquiry commission report on the CDO machine provides useful insights for me to undertake this analysis. My emerging findings suggest that while some anticipation and reflection occurred in the CDO development process, principles of deliberation and responsiveness were limited. Does this conclusion reflect reality? Can this conclusion be extended to all forms of financial innovation? These questions are still under investigation.

The Dimensions of RI

From my research, I have found that that the issues regarding responsible innovation are well known to scholars in the field of science and technology studies. More recently, concepts of anticipatory governance and technology assessment has been drawn together into the emerging concept of responsible innovation; which suggests that to innovate responsibly entails an institutional commitment to be: anticipatory, reflexive, deliberative and responsive.

a)       Anticipatory – describing and considering plausible intended and unintended broad impacts and consequences of the financial innovation.

b)       Reflexive –. ethically reflecting on underlying purposes, motivations and potential impacts of the financial innovation,  what is known, what is not known, associated uncertainties, risks, areas of ignorance, assumptions, questions and dilemmas.

c)       Deliberative – inclusively opening up such reflection to broad deliberation involving stakeholders, users and public.

d)       Responsive – using this collective ‘reflexive capital’ to adjust the trajectory of financial innovation in response, in an iterative and flexible way that keeps options open.

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