Tag: risk management

Using Sentiment Analysis For Reputation Risk Management

Data Driven Reputation Risk Management

When it comes to risk management, one of the major pillars to monitor and manage is reputational risk. Unlike credit or interest rate risk, reputational risk is hard to define and even harder to quantify. Given the number of discussions on various news platforms, social media channels, and forums, there are hundreds and usually thousands of discussions taking place without a bank’s knowledge.

What Banks Need To Know About The Velocity of Risk

Velocity of Risk in Enterprise Risk Management

Banks that are looking to enhance their risk management practices should consider incorporating the concept of the velocity of risk into their enterprise-wide risk management practices. The topic is germane as with the rise of the Trump Administration and the growth of social media, a company or industry can wake up one morning and find out that they are in the cross hairs of a Tweet torrent.

How Banks Are Managing Portfolio Credit Risk

Risk Parity in Asset Allocation

Risk parity is a portfolio allocation strategy that that every bank manager should understand because the concepts are key to understanding how a bank constructs both its balance sheet and its credit portfolio.

Bank Best Practices To Handle Real Estate Loan Concentrations

Managing CRE Concentrations

This past December, the regulatory community telegraphed their intentions of focusing bank examinations on commercial real estate (CRE) concentrations in 2016: “During 2016, supervisors from the banking agencies will continue to pay particular attention to potential risks associated with CRE lending” (SR 15 17, Dec 2015).

A Recipe for Risk Management

Bank Risk Management

There is a trendy restaurant in New York City that temporarily changed its menu to serve food composed entirely of garbage. The idea was to highlight the amount of food that is wasted worldwide. Food waste happens for different reasons in different places – in developing countries, difficulty with storage and refrigeration are the problem. In developed countries, aesthetic standards are the primary culprit, and changing this perception was the goal of the experiment.

Balance Sheet Rebalancing For Banks In 2016 – The Macro View

Rebalancing Bank Balance Sheets In 2016

The truth is that your bank should discuss balance sheet rebalancing every time credit spreads or rates are expected to materially change, any time the risk tolerance of the bank changes or at least once per year. 2016 just happens to coincide with the start of a rising interest rate cycle so now is the perfect time to have that conversation with your board and management team if you haven’t done so already. Every fund manager knows that making the right asset allocation decision is one of the best ways to stay ahead of the competition.

Using Decision Trees in Banking (And Why Innovation Makes Economic Sense)

Decision Tree For Bank Risk Management

If you are looking to make best-in-class decisions, it pays to have a variety of best-in-class tools at your disposal. Oftentimes, a reason why banks don’t innovate more is because they lack the tools and experience to properly understand the risk and the return. Without a way to quantify the risk, stagnation occurs. As banks develop their risk management culture, it pays to have all managers conversant in the proper tools to manage risk.

What Bankers Need to Know About Economic Predictions

Probabilistic Bank Predictions

In the Wall Street Journal, on Bloomberg radio or on CNBC, economists and pundits predict the future of the US economy.  On any given day, in the same paper or show, various economists will be outspoken and confident about their predictions – their hubris is striking.  One analyst will state that the S&P will continue to decline, another will state the opposite.  One pundit will predict that the price of oil will fall, and a

VAR for Enterprise Risk Management

Value-at-risk for banks graphic

Two risk managers were discussing their fear of flying and crashing to their deaths in an airplane.  One of the risk managers stated that he had a morbid fear of being on a plane that is blown up by an onboard bomb.  The second risk manager asked how he handled this fear, to which the first risk manager replied - “Simple, I bring on board with me a bomb that I have control over, and of course I would never detonate it.”  “How does that help?” said the second risk manager.  The first risk manager replied, “The chanc


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