Methods and Models for managing risks
It is vital for financial institutions to be able to identify and measure risks accurately and quickly. We can help.
This involves finding models for managing risks by analyzing historic information and using expert knowledge. It includes anticipating future losses that are unavoidable, or sometimes deliberately taken, to balance against accruals or equity.
We can help our clients develop methods and models for all the major types of risk including:
- Credit and counterparty risk: Models for current and potential future exposure, probability of default and loss given default.
- Market risk: Including current hot topics such as the measurement of the interest rate risk banking book and the model change for the market risk trading book from Value at Risk to Expected Shortfall.
- Liquidity risk: Addressing the need to assess assets on a regular basis to identify their ability to get liquidated under stressed market conditions, at short notice and stable prices. Unpredictable withdrawals of savings deposits and the inability to renew other funding describe the liquidity risk banks face on their liabilities.
- Operational Risk: Meeting the requirement of banks to set-up data about operational risk-caused losses as well as existing operational risks, especially to calculate capital requirements and to enable scenario analysis.
How BearingPoint brings value
At BearingPoint we offer proven approaches and project procedures to help our clients systematically identify, measure and manage each type of risk. We integrate the different methods in a risk management framework:
- Risk identification: Investigating and describing risk events resulting from products, processes and systems.
- Risk analysis: Categorizing risk, identifying key risk indicators (KRI) to enable risk monitoring and designing the risk database.
- Risk evaluation: Qualitatively assessing risks, quantifying risks and scenario analysis.
- Risk management: Identifying and appraising existing measures to handle risks and identify further actions.
- Risk action plan: Planning, deciding and implementing risk actions considering costs and benefits.
- Risk monitoring: Installing a management information system (including an indicator-based early warning system), reporting risks to senior management, monitoring risk measures.
- Review the risk management circle: Auditing adherence and the efficiency of actions.
We can help you set up a risk management framework for each type of risk, developing or enhancing risk management methods and integrating them into your processes.