Operational Risk

9 Things They Do Not Tell You About Risk Management

9 Things They Do Not Tell You About Risk Management

Risk Management means different things to different people. In this post we explore some truths about professional risk management that highlight both the challenges it is facing as a discipline and the significant role it can play towards a sustainable future

Reading Time: 13 min.

Informal Risk Management has been practiced by individuals since time immemorial. This is the domain of intuitive decision-making, assessing a situation on the spot and taking immediate action to avoid obvious risks.

Risk Compensation: From Face Masks to Credit, Market and Systemic Risk

Risk Compensation: From Face Masks to Credit, Market and Systemic Risk

Reading Time: 7 min.

What is Risk Compensation?

Risk Compensation is a behavioral model of human attitudes towards risk which suggests that people might adjust their behavior in response to the perceived level of risk. It follows that, depending on the strength of the effect, that it might counteract and even annul the impact of risk mitigation, if the updated attitude and behavior modifies the actual underlying risk

What constitutes a good risk taxonomy?

What constitutes a good risk taxonomy?

Reading Time: 4 min.

What is a Risk Taxonomy?

There are various formal definitions of risk taxonomies (and we will go over those below), but it might be useful to first look at a very intuitive example of a risk taxonomy: the classification of fire hazards (also known as fire classes)

Fintech Risk Events

Fintech Risk Events

Reading Time: 1 min.

Fintech Risk Events

Fintech Risk Events is an open catalog of observed and publicized operational failures of fintech business models. The catalog aims to document, in due course, such events reasonably accurately, to allow risk managers understand the (potentially new) vulnerabilities of new financial services models.

Scope

The scope of the operational risk database is Fintech companies. By that we mean newly established financial services providers that operate exclusively via new (digital) platforms and are (mostly) unregulated. The fintech sector is distinct from established financial services firms that operate with a mix of technology platforms and are (mostly) regulated.

Reducing variation in credit risk-weighted assets

Reducing variation in credit risk-weighted assets

Reading Time: 4 min.

Reducing variation in credit risk-weighted assets - The benign and vicious cycles of internal risk models

March 2016 wasn’t a good month for so-called internal risk models, the quantitative tools constructed by banks for determining such vital numbers as how much buffer capital is needed to protect the savings of their clients.

AMA Risk Model

AMA Risk Model

Reading Time: 6 min.

ΝΒ: This is not a post about real whales and the ongoing struggle to keep these magnificent mammals alive for future generations to marvel at. Hopefully the individuals who have risked their lives to bring the near extinction of many whale species to worldwide attention will not take offense with us usurping imagery linked to this valiant campaign. We simply want to draw attention to another, rather more armchair type of campaign, namely: saving the_AMA risk model. A bit more esoteric as a cause, but ultimately a good cause nevertheless_

The periodic table of risk elements

The periodic table of risk elements

Reading Time: 5 min.

You know the periodic table of elements, even if you flunked your science courses! It is the large colorful and blocky table that hanged on every school’s classrooms before becoming yet another mobile app. The periodic table is one of the early and iconic achievements of science. It lists all the pure chemical elements found in nature, the building blocks of all possible material substances. Each block contains a set of numbers that unambiguously characterizes each element and a single or two letter abbreviation for each: H for Hydrogen, He for Helium and so forth, going on for over a hundred different elements. When the periodic table was discovered by Mendeleev (apparently in his dream!) it was an extraordinary realization that the physical world has an underlying order at the microscopic level. In his own words: