Over the last 15 years, organisations have sought to improve the identification, measurement and management of both market and credit risks, and recent years in particular have highlighted there is still a way to go.
Deregulation, globalisation and improvements in financial information management systems all point to the increasingly sophisticated and complex requirements for measuring risk profiles, whether fraud risks, legal risks, physical or environmental risks.
Key risk management issues
- Basel II regulations requires banks to have a capital charge for Operational Risk as part of the capital adequacy framework.
- With new EU rules concerning concentration risk (revised large exposure regimes) coming into effect in 2011. Like insurers, banks will need to understand the accumulation of risk or lending they have in a fixed location and interconnections or dependencies within their lending portfolio (identifying customers' suppliers and their locations).
- Catastrophic events (flooding, Buncefield, etc) potentially impacting banks' operations, causing business disruption.
- Pinpoint the location of your assets by individual address level or by product group and identify risk at any given precise location, not only the physical asset, but your financial interest e.g. business loan, mortgage, insurance.
- Reveal the potential impacts of different types of risks and events to improve contingency planning and more accurately calculate your potential loss to a single event with scenario modelling.
- Build a thorough understanding of risk within given locations or areas to identify hotspots and trends.
- Assess the extent of exposure before and during disaster scale events to improve business continuity planning.
Benefits to your business
- Improve modelling and loss predictions.
- Provide accurate capital allocation of operational risk within the Basel II framework.
- Manage not only exposure or risk in the bank's physical asset portfolio, but also the banks financial interest in the asset for mortgage or loan customers.
- Less capital apportioned as your risk is better understood.
- Provide contingency plans on the fly as events happen.
- Speed up and improve the accuracy of the calculation of exposure to a event to reassure shareholders, regulators and stakeholders.
Contact us for more information.