market risk « Lepus

In the quest for enterprise risk management, several banks have recently undertaken radical reorganisation efforts to integrate different risk teams into a more collaborative whole. However, any permutation of reporting lines and designation of roles can prove to be an expensive – and ultimately, desultory – exercise in the absence of a sound and communicable risk culture. Mitigating this situation requires a top-down approach to setting the risk appetite of the business, which can be mediated by risk factors collected through a bottom-up approach.

Mark / Credit Risk Dashboards

Since the financial crisis, several banks have reorganised the Risk Management department so that it can effectively serve as a second line of defence against the excesses of business lines. Part of this goal is to ensure that information on key risk metrics is available to all stakeholders at all times so that damage from a potential tail event can be punctually forestalled.

Intraday Monitoring of Market Risk

Although the regulatory climate over monitoring frequency of market risk has been marked by relative ambiguity in recent years, the evolution, complexity and effervescence of financial markets renders intraday reports a sensible approach. However, several issues may yet inhibit its feasibility.

The Organisation of Market Risk

What makes this crisis unique, amongst other things, is the unprecedented volatility that we have seen during 2008. More importantly, this volatility was not limited to any particular asset class, but was evident across the board. Various risks were simply not captured, deemed plausible or accounted for. This has resulted in great pressure both internal and from the regulatory entities all over the world.

The Urge to Merge - Credit and Market Risk

Much has been said about risk divisions, particularly in the wake of the brutal financial meltdown last year. However, risk divisions are upping their game in changing the methods of how they do business. Though banks may not agree on which areas of market and credit risk should overlap at present, the move to integrate the two is definitely on the cards for the future.