Near Real-time Risk Exposure accumulation Monitoring
For improved business decisions in operations
Risk exposures accumulates with each transaction processed by the organization and transactions are part of the bank’s operations. COOs should have the ability to identify and monitor such exposure accumulations so they can intervene in a timely manner, as soon as they discover that certain thresholds are being exceeded. The Risk accounting method, implemented in MetRisQ, allows COOs to identify, quantify and monitor risk exposures as they accumulate and break them down by product, department, business line, geography etc. Therefore the COOs will be able to better focus on the parts of the business that appear to generate more risk or unwanted risk types.
Moreover, Risk Accounting provides the common framework for a better understanding among operations, risk and financial managers as the communication relies on the same risk quantification system.
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.
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.
What Experts Say
“The Risk Unit is the first mechanism proposed to integrate the major components of risk in a large financial institution, allowing senior management a better picture of their exposures and providing a first pass (or upper bound) on the risk structure of the institution.”
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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