Risk management at the top : a guide to risk and its by Mark Laycock

By Mark Laycock

With over 30 years' adventure of hazard administration in banks, Mark Laycock presents a complete yet succinct non-technical evaluate of danger and its governance in monetary associations. Bridging the distance among texts on governance and the more and more technical features of hazard administration the e-book covers the most danger kinds skilled through banks - credits, industry, operational and liquidity - outlines these risks Read more...

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by no means earlier than has there been such strain for agencies to decide to extra rigorous company governance values. threat administration on the most sensible offers a present, non-executive director's consultant to Read more...

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The 99% confidence interval may represent a possible loss of £5,000,000. As a result, there is a 1% chance that the loss will be larger than £5,000,000, but it does not indicate how high that loss could be. The choice of confidence interval might be explicit, for example equivalent to an “AAA” credit rating for a risk appetite statement or it might be implicit, for example in regulatory capital ratios. Numerically the confidence interval could be 90%, 95%, 99% or higher. Some risks, such as market, credit and operational risks, can be modelled and quantified using statistical distributions.

This chapter looks at some of the mechanics and issues in overseeing risk. Chapter 5 will consider issues around setting risk appetite. Oversight in this chapter refers to supervision of processes; in this case the risk processes. For the Board to have the information they need, it is necessary to have a degree of consistency and appreciate how this oversight is put into practice within the firm. 1 INTRODUCTION Elements of risk oversight include: ∙ ∙ ∙ The direction of risk – is it getting larger or smaller?

Over recent decades the precautionary principle has been combined with understanding by the counterparty of the possible range of outcomes (risk). This has led the judiciary to categorise counterparties into knowledgeable or unknowledgeable. The assumption is that the knowledgeable counterparties can be considered to be experts or have the capacity to be aware of the possible outcomes. For unknowledgeable counterparties the firm is assumed or even required to apply a higher standard of care. The presence of knowledge, or not, is not limited to the purely economic or logical outcomes, but increasingly needs to take into account behavioural aspects of decision making.

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