This publication identifies risk management issues that are likely to emerge in the future and the solutions that will be developed to meet these needs. This comprehensive text covers credit, market, operational, liquidity, outsourcing and insurance risks. Essential reading for all risk managers, board members, financial service suppliers, and a useful reference tool for bankers.
This comprehensive title will guide you through:
- Treasury and ALM risk - Risks within the hedge funds industry - Risk management and structured products - Regulation and credit risk - Challenges facing the credit derivatives market - Use of credit rating agencies and the IRB approach - Operational risk management - Operational loss data issues - Stress testing - Money laundering deterrence - Developments within IT and online banking - Impact of outsourcing - Insurance risk - Pensions liability risk
Table of Contents
PART I: TOTAL RISK MANAGEMENT
1 The cultural frontiers of total risk management Dennis Cox, Risk Reward Ltd
2 Strategic risk: bringing the discussion into the boardroom Craig Cohon, The Next Practice
3 Risk management within corporate finance Frank Moxon, Williams de Broe
4 The risk management of asset management Dennis Cox, Risk Reward Ltd
PART II: MARKET RISK
5 Asset liability in a major bank Asif Ahmed, Director, Citigroup
6 Treasury and asset & liability management risk Thomas Day, Sungard
7 The risks within the hedge funds industry Diccon Smeeton, ABN Amro
12 Citigroup’s Basel-ready tool: the Credit Risk Model Jennifer Courant, Managing Director, Citigroup Center
13 Overcoming the challenges in the credit derivatives market Pontus Eriksson, Sungard FRONT ARENA
14 The use of credit rating agencies and their impact on the IRB approach Markus Krebsz, formerly Fitch Ratings
PART IV: OPERATIONAL RISK
15 Frontiers of operational risk management Ralph Nash, Director of Group Operational Risk, Axa Ioanna Panayiotidou , AXA UK
16 The issues relating to operational loss data - internal and external David Breden, Director, HSBC
17 Stress testing Stuart Burns, Standard Chartered Bank
18 Money laundering deterrence: the challenge of applying a risk-based approach David Blackmore, MHA
19 The risk management of outsourcing Nina Sodha
PART V: OTHER RISK
20 Developments within IT and online banking Dilip Krishna, Teradata
21 Risk management and financial control Angela Caldara, formerly Unicredito
22 The financial impact of outsourcing Roger Bach, HY Investment (UK) Ltd
23 Insurance risk Anthony Smith & Dennis Cox
24 Developments in pensions liability risk Paul Sweeting, Fidelity Investments International
The importance of proper risk management, and the consequences of failure to have it in place, have never been greater. Where failure occurs, not just firms but also individuals may face consequences. The FSA’s Director of Enforcement, Margaret Cole, said in 2006 that “Failure to manage risks properly is now, more than ever, likely to result in disciplinary action being brought against individuals as well as firms”. The FSA has power to censure publicly, fine and even ban individuals from working in the financial services, where there are serious contraventions of the FSA rules.
The Frontiers of Risk Management therefore meets an important need and is well timed. The book is comprehensive in its scope, seeking to cover the entire range of financial services risk management. But that is surely appropriate when firms face so many increasing kinds of risk, not least geopolitical risks and the consequences of climate change. Many of the chapters are extremely topical in terms of current regulatory concern, for example senior management responsibility (see Chapter 2 - Strategic Risk: bringing the discussion into the boardroom), hedge funds (see Chapter 7 - The risks within the hedge-fund industry) and stress testing (see Chapter 17 - Stress testing and risk management) are all areas which the FSA has focused on recently.
As the FSA moves towards an increasingly principles-based approach, there will be a greater expectation on firms to work out for themselves how to satisfy their regulatory obligations, and they will have less certainty that they are doing so. Good risk management can help to reduce the uncertainty, and provide a road map for senior management on the key areas that require greater attention. (as well as helpful documentary evidence and an audit trail for the regulator). Firms that do this well will enjoy a regulatory dividend - less attention and scrutiny from the FSA. Those that have poor risk management will endure more intrusive regulatory examination. However, as Tom Fitzgerald points out in his chapter (Chapter 1 - the cultural frontiers of total risk management), risk management is not just about satisfying minimum regulatory compliance, but is also at the heart of more effective and efficient business management.
Sometimes risk managers are viewed (perhaps not always unfairly) as a specialist breed, inhabiting the dark spaces between compliance and internal audit. This book demonstrates why risk management should be viewed as a core discipline, at the centre of an organisation. It deserves to be read by a broad audience.
[Biography: Ian Mason is a Partner in the Financial Services Regulatory Team of Barlow Lyde & Gilbert. He worked for 6 years at the FSA, and was previously Head of Department, Enforcement Division, FSA]