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October 13, 2011
New Issue of Intelligent Risk Now Available
The new issue of PRMIA's Intelligent Risk publication is now available free to all PRMIA members. Simply access it at http://bit.ly/iRiskoct11.
This issue's Visions of Risk section features five thought-provoking articles, summarized below:
Systemic Risk - It's Still All About the Data
By Allan Grody
The financial services industry today consists of monstrously complex global financial institutions ... systemically important ... too big to fail... even too complex to manage! Regulators are focused on observing systemic risk in these giant, global institutions. Systemic risk analysis is a new discipline in its infancy. We have barely figured out the science of individual enterprise risk management when we now have placed another burden on our regulators through the Dodd-Frank legislation and soon through the European Communities central bank. This is the burden of observing the buildup of risk that has the potential of cascading into the global contagion of systemic risk. However, it is understood that without a global view of the underlying positions and cash flows, aggregated through common identifiers, systemic threats cannot be detected.
Recovery and Resolution Planning - Asking the Right Questions
By Andrew Davidson
In November 2011 the G20 leaders will endorse recommendations to address the moral hazard posed by Systemically Important Financial Institutions (SIFIs). This will include the requirement for an "adequate and credible" recovery and resolution plan (RRP) from any firm deemed to have a potential impact on financial stability. What questions should firms ask themselves in relation to their RRPs?
Five Downside Risks to the Global Recovery: Global Macroeconomic Outlook and Risks
By Juan Licari, Ph.D. and Andrea Appeddu
The economic recovery of the major Western economies appeared uncertain as the fourth quarter of 2011 began. In the U.S., the outlook for consumers has deteriorated markedly, with the unemployment rate edging higher, confidence shaky and house prices still weak despite accommodative monetary and fiscal policies.
IT Risk Evaluation
By John Kyriazoglou
This article describes a methodology to be used in offering concluding remarks to the management of an audited entity as to whether, for each objective assessed during an audit assignment, the situation is satisfactory, requires improvement or unsatisfactory. The aim is to provide a conceptual and practical framework to define and implement an evaluation method for Internal Audit assignments. The main uncertainties are identified and the objectives of Internal Audit are described, then we present an evaluation methodology for risk assessment.
Stress Testing: Lessons Learned and Emerging Requirements - The U.S. and European Banking Authority (EBA) Frameworks
By Thomas Day
Banks are increasingly required to integrate risk infrastructures, governance processes, and risk appetite frameworks in ways that have not been required in the past. While stress-testing is nothing new, the recent U.S. and E.U. stress-testing requirements and guidance represent a methodological shift, combining risk analysis and measures that have historically remained in silos. Meeting the new framework of requirements in a repeatable fashion requires unprecedented coordination across various business, risk, and operational units. A major insight from the last couple of years is that all banks are subject to the same macro-economic shock(s). For all the talk about enhanced risk management, enterprise-risk modeling remains primitive and non-integrated at many systemically important financial institutions (SIFIs). During the crisis, regulators were flying blind and not much has changed. A new framework for flexible, forward-looking, and integrated scenario analysis and stress-testing is needed. Implementing such a framework and combining business, capital, and risk strategy requires an enterprise decisioning tool that is agile, flexible, and serves the needs of internal and external stakeholders.
Posted by PRMIA_Marketing at October 13, 2011 09:33 AM
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