What is the future of stress testing? To speculate on the future of Stress Testing we need first a basic definition what stress testing is. Broadly speaking, the goal of Stress Testing is to assess how a system would behave under adverse conditions that - while not the most likely outcome with the knowledge of today - are within the realm of the plausible. There are, broadly speaking, two types of stress testing: The Real stress testing version and Hypothetical stress testing version.
Is the size of global debt truly “astronomical”? The notion of astronomical numbers and figures is quite frequently seeping in everyday language when large quantities of something are encountered in “normal” life. The strict definition of astronomical is obviously something of, or relating to, astronomy and astronomical observations but in common usage it also denotes something enormously or inconceivably large. This is, of course, because astronomical figures are inconceivably large!
NACE Classification and the EU Sustainable Finance Taxonomy: The integration of climate risk and broader sustainability constraints into risk management is a monumental task and many tools are still lacking. Yet there is strong support and bold initiatives from policy bodies and an increasing focus from the private sector side. The EU (Sustainable Finance) Taxonomy is one such initiative of fundamental significance as it attempts to map at a granular level economic activities with respect to their climate risk mitigation or adaptation potential and create tangible metrics and thresholds to measure progress (the ultimate anti-greenwashing treatment)
Representing economic activity using pictograms: Visualization can produce significant new insights when applied to quantitative data. It is currently undergoing a renaissance that mirrors other developments in computing and data science. Sophisticated open source libraries such as d3.js or matplotlib, to name but a couple, are enabling an ever wider range of users to distill valuable information from the avalanche of data being produced. Yet when it comes to visualizing data that relate to abstract concepts it can be quite difficult to find an appropriate grammar to express the quantitative context.
Fintech, embrace your inner regulator! 2017 is shaping to be the year of #regtech, aka new technology startups setting up digital shop to help the financial services sector cope with its heavy regulatory burden. But what is regulation? Why is it a burden and how does it relate to real risks and risk management? The narratives around financial regulation have been, for some time, completely dominated by the so-called compliance perspective.
Business Model Risk - The Forgotten Risk Type: Sustainable business models that demonstrate adequate profitability over long horizons are key to a healthy market economy. This applies to firms and organizations of any size and in any sector. But how do we determine what is sustainable and how can we tell a risky business structure from a stable one? On the small-scale end of the size spectrum we have the domain of startups and SME’s.
Risk Management Skills for the Fintech Era Risk Management Skills for the Fintech Era: Financial services jobs continue being decimated. A recent (as of the initial post date) FT article was a sobering summary of the continuing transformation of the financial sector: 2015 alone has seen more than 10% reduction of the total workforce across large EU/US banks: As main drivers for this true jobs hecatomb are cited higher minimum capital requirements (that depress Return on Equity and hence require lower costs to restore it to investor acceptable levels), low interest rates that erode Profitability Margins, and a generally subdued economic landscape which reduces Volumes.
The mystery of the collapsed cathedral: You walk to the center of an old city and you see its glorious cathedral lying in ruins. What in the world has happened here? Your investigative instinct goes into overdrive. This is not supposed to happen. Not in peacetime anyway. How can it be that this magnificent edifice, after gracing the town’s central square for who knows how many centuries, is now little more than a rubble pile in the center of town?
In our personal lives, it is the balance between work and life, or the dreadful weight balance. In the professional sphere it might be the balance between debt and equity in the financial industry, or the balance between convenience and citizen privacy in the new tech industry, or the welfare of the many balanced against the property of the few, or finally the geopolitical balance of power of different peoples… Balance ensures sustainability as it helps steer away from the risks that lurk at the extremes.