Meaningful Risk Reporting
Based on dedicated risk metrics
The Risk Accounting method provides a specific risk metric (the Risk Unit – RU) for the quantification of all risk elements relevant to the business. By identifying, measuring and then monitoring risk exposure as it accumulates at the organization’s level, risk managers have the opportunity to provide more meaningful results to the upper management, stakeholders and colleagues.
It’s no wonder that the color or level based risk evaluation systems currently used have reached their limits. Also that continuous and more complex financial related number crunching does not bring the expected results. This is because they cannot be a solid base for decision making.
How MetRisQ can Help…
Chief Financial Officers are the ones to pay for the failures in risk management. Unexpected losses are a CFO’s worst nightmare. The current approaches require ever higher levels of financial reserves to offset the effects of a risk event, however, apart from the unknown losses generated by the risk event, the reserves will take the same path as the losses, thus increasing the impact of the risk event on the organization.
A metric based risk quantification system would help CFOs better identify the size of the potential loss and allocate capital accordingly, in a more flexible and precise manner, while also being able to decide with more confidence about safer investments.
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
“(the) proposed framework is both novel
in addressing the limitations of existing ERM risk measurement frameworks and practical in adapting the control and reporting frameworks that already exist in accounting and general ledger systems.”
Roger Chen, CFA, PRM
New York Life Insurance Company
(“Comments on Risk Accounting” published by the Journal of Risk Management for Financial Institutions, Henry Stewart Publications 2016)
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