Our recent article on the risk matrix [LINK] is all fine but the concept of a risk matrix from the outset seems to embody much of what is wrong in risk management today, let me elaborate on all of this for a moment.
Saturday, August 29, 2015
Saturday, August 22, 2015
A recent debate on the G31000 forum titled "Test your Risk Matrix" isn't the first time this contentious subject of Risk Matrices has been debated between practitioners and, I doubt it will be the last. The use of a Risk Matrix, which we will explain in this blog article, is broadly popular among enterprise risk managers looking to report aggregated and enterprise-wide view of exposures that threaten their stakeholders. Those that use risk software systems often find that the Risk Matrix comes installed as part of the package and I know some practitioners out there wouldn't procure a risk solution unless this type of report was available from the outset.
The Risk Matrix is a bit of FAIL though and it generally does not yield to the industry of risk management what it promises. Some seasoned risk analysts are so disgruntled with the tool that they choose to drop the whole reporting concept altogether. That is all fine but it doesn't detract from the requirement that stakeholders are going to ask for a summarized view of their risks at some point in time and as it stands, many of them have become accustomed to seeing their world of risks in a matrix.
Disbanding the Risk Matrix to the rubbish bin doesn't seem a viable solution for avoiding its problems, unless something better comes along. So then, let's tackle its flaws and try to resolve them.
Friday, July 31, 2015
An interesting study on the internal "Risk Governance Culture and Behaviour" of Australian and Canadian banks has recently been published by Elizabeth Sheedy and Barbara Griffin from the Faculty of Business and Economics at Macquarie University [LINK].
There are some curious insights to be found after surveying 22,145 employees of 222 various business units in six major banks headquartered across two countries and, I have plucked out some of these findings or perhaps their interpretations in this short blog posting.
Monday, June 29, 2015
It is official, the leap year is just not enough. Analysts have known for a while but fearing the worse that the worlds rotation is slowing down, even though life is speeding up, scientists need to find a way to keep everything in sync. With all of this in mind, the time lords in charge of this planet's official time system have decided to add an extra second into the year.
This time tampering is referred to as the leap second.
This is not some tomfoolery on April the 1st, nor is it February the 30th but it is going to happen tomorrow on June 30th this year.
Friday, June 12, 2015
George Osborn and Mark Carney are determined that the culture of banking as it has become accepted by the community at large, although deeply criticised over the years, can actually change.
Saturday, April 4, 2015
Friday, March 27, 2015
A couple of days ago I published an article that mapped out the efforts required to perform a complete valuation of a new project or entity, and that article [LINK] seemed to have generated a lot of curiosity. In this sequel to the Valuation Steps posting, we are going to take a slightly deeper look at how to identify specific the parameters which are needed to perform a Discounted Cash Flow valuation.
Wednesday, March 25, 2015
Product managers, corporate risk assessors, project managers, project financiers and many other types of business analysts often need to value uncertainty in their business strategies. In this small blog posting we take a look at the steps that would generally be followed for a typical sound valuation of 'corporate risk'.
Tuesday, March 24, 2015
Wednesday, February 18, 2015
The bank for International Settlements has been very busy over the last few months publishing amendments to both Basel II and Basel III, and it was only a matter of time before Pillar III was swung in for a similar maker over.
Monday, December 22, 2014
It was to be expected that the proxy system for calculating Basel II operational risk capital was always dangerously simplified and consequently fraught with inaccuracies that would under or overestimate capital. A recent publication from the Bank for International settlements confirms what risk practitioners have feared for years and in this post, we take a look at the new recommendations that have been released from the Bank for International settlements.
Friday, December 19, 2014
In the first article on The Shape of Risk [LINK], we investigated why risk practitioners who simplify risk evaluations to a single point estimate will miss the shape of risk and we demonstrated this problem by comparing two very similar but independent risks side by side.
Our inaugural posting on the Shape of Risk series (I fair there might be a few chapters to come yet) attempted to keep the analysis lucid by only focusing on the comparable magnitude aspect of two risks and while the Shape of Risk part I is a nice bite size read, it leaves the frequency of a potential risk event untreated.
In this blog posting we'll address measurements around the likelihood aspect of risk accordingly and hopefully in the same straightforward manner.
Friday, December 12, 2014
Risk practitioners who evaluate risk as a single number will miss the shape of uncertainty.
If risk is the effect of uncertainty on objectives, just as ISO 31000 defines it to be, we need to accept that there are many ways to describe this uncertainty. In this short blog posting I am going to demonstrate that risk has shape and being able to dimension this shape will tell us a lot more about the underlying risks we have to manage.
Thursday, November 20, 2014
Tuesday, October 7, 2014
The discussion of whether Risk Management is really an art or a science has become a popular debating subject over the last few years as practitioners try to place it within a specific faculty of study. Today we deliberate on this very subject again and on the G31000 forum [LINK].
Risk management can of course be an art or a science depending on one's point of view, taking features from both schools to become a craft.
Monday, September 29, 2014
A decade ago, plus a couple of months, the banking community was thrown a new mandate from the Bank for International settlements titled Basel II. For the world of Basel this was the first time regulation had included operational risk as part of the capital regime program.
Ten years on, I have decided to take stock and pull together a presentation on what has worked for the banking community in operational risk management and what remains a stubborn challenge.
Sunday, September 28, 2014
Friday, September 5, 2014
Wednesday, August 6, 2014
An interesting request came through from one of our customers today and is worth sharing on the Causal Capital blog because a lot of risk practitioners struggle with some of the more complex areas of modelling uncertainty. This is especially the case when risk managers are attempting to assess the size of impacts from catastrophes.
Monday, July 21, 2014
Assessing and measuring risk appetite away from an investment portfolio is perhaps one of the most difficult risk management initiatives practitioners have to entertain, it is also discussed often on risk forums and written about avidly by many consulting firms. Yet, very few subject matter experts actually delve into the semantics required to measure risk appetite and this is kind of frustrating. I personally have plenty of clients that have expressed their sentiments around how difficult the entire risk appetite program is and many managers out there struggle to take this important aspect of risk management to completion.
In this article we release a white paper that steps through the entire process of measuring and assessing risk appetite, dealing with the numbers specifically rather than just top level summaries and catch phrases on what risk appetite is.