It has been a while since the Causal Capital team has published a white paper, but due to popular request, we are going to start writing these wonderful pieces of work again. All faring well, we will be publishing a White Paper each month and today we are happy to release our White Paper on Risk Aggregation.
Over the last week alone, several people have reached out to me to inquire about how a basket of risks can be aggregated or quite simply, what are the benefits of setting up a process to aggregate risk at an enterprise level. In response to these questions, we have written a white paper on Risk Aggregation which can be downloaded from this [LINK].
Risk Aggregation White Paper | Martin Davies [LINK]
In this publication, we not only attempt to demonstrate how to perform Risk Aggregation at a foundation level, we also try to describe how the mentality needs to shift with executive management when risk resources are balancing across a portfolio of assets.
Risk Managers need to overcome two specific hurdles to aggregate risk metrics across their enterprise successfully. The first difficulty is conceptualising a combined risk/return measure in the context of a netted portfolio. The second hurdle will be arduous to achieve without this appreciation but will take a risk analyst deep into the matrix models and sensitivities around corporate finance to value the effects of combined enterprise risk.
Anyway there will be more technical publications in a couple of weeks time, and please do reach out to the Causal Capital team if you have any specific questions.