Easier Capital Allocation
Based on measurable risk exposure by bussiness component
The Risk accounting method, implemented in MetRisQ, allows CFOs to identify, quantify and monitor risk exposures and easily translate them into monetary values. Thus, the capital required for risk mitigation can be more precisely budgeted and allocated.
Under the current risk assessment practices, it is very difficult for CFOs to allocate risk reserves against a color or level based systems (such as red/amber/green or high/medium/low). They need a firm figure that would reflect the risk exposure situation in a comprehensible way.
This is what MetRisQ offers, an aggregated risk exposure score that can be directly correlated with monetary values. This ability makes possible a meaningful communication between CFOs and CROs, based on the same risk exposure understanding.
How MetRisQ can Help…
Chief Risk Officers are concerned with the difficulties of conveying a relevant image in respect to risk exposures while using only color or level based systems of reference. They are also challenged by having to focus on all aspects of the business at once, making sure they can spot signs of risk events before they happen.
A metric based risk quantification system would help them better understand and communicate risk exposure information, find the common reference framework with the CFOs for more effective capital allocation and with COOs for more transparent risk countermeasure planning and implementation.
COOs are overseeing the precise area where risk accumulates – operations. With each and every transaction, risk exposure is accepted by the organization and there is no way for the COO to point where and how much risk has been already accumulated and what is the best way to stop further accumulation.
A metric based quantification system would better help COOs monitor risk accumulations in near-real time, accross the entire organization, identify and prevent potential loss events, precisely focusing on the most exposed areas of the business and applying the most effective risk mitigation measures.
What Experts Say
“I suppose more directly applicable to the Risk Unit is the London Whale trading loss suffered by JP Morgan… …Here, the Risk Unit would bloom.”
Julian Williams, PhD
Durham University Business School
(“Comments on Risk Accounting” published by the Journal of Risk Management for Financial Institutions, Henry Stewart Publications 2016)
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