GlobalRisk Community - I will be reporting from the Enterprise Risk Management in the Banking Industry Conference this Thursday and Friday in NYC.....I will be posting the session topics later, so you will be able to direct specific questions to the presenters. Stay tuned!

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  • 1.  Lack of clarity with rules and regs

    2.  Getting buy in from all lines of business

    3.  Modeling accurately

    4.  Sheer size of many institutions

     

  • Hi Michael,

     

    Thank you.

     

    Did they outline any pain points they are experiencing implementing ERM strategy in order of importance?

     

  • From a high level overview, all of the institutions agreed that the regulatory agencies are still trying to get a handle on the latest legislation and this was echoed by a senior level person from the FDIC - "that one year after Dodd Frank, the rules were still 'ripening'."  Especially in regards to an institution having a "Living Will."  More oversight and authority has been given to the FDIC and the creation of the Office of Complex Financial Institutions has bolstered the oversight with banks "To Big To Fail."  The transparency of these banks is becoming much improved.  The far reaching tentacles of Lehman Brothers non-banking divisions drove it into bankruptcy and lack of transparency has had a far reaching effect.  Much more emphasis is being placed on a bank's insolvency/distress plan and understanding the legal entity. 

     

    The regulators have begun taking a much more consultative approach and all the institutions polled said that having these ongoing communications with their prospective regulators has helped with ERM.  The carrot and the stick approach is being replaced by open ended discussions, whereby the bank and regulators really have the ability to explain and understand the processes put in place. 

  •   


  • Dear Oscar . . . thanks so much for the question and a promotion to Dr.  My Grandmother will be very proud of me.  :)  This question covers a little slice of risk that is an important part of ERM - The conference really took a top down approach, so the question was over the heads of these enterprise risk planners.  I think we should throw it out to the GlobalRisk Community for their feedback!  Cheers - Mr. (definitely not Dr.) Wein

     

    Oscar said:

    Dear Dr Wein:

    Suppose, there is someone with an immaculate credit history, that is, thrice  he 
    has borrowed, the amounts are 100, 200 and 300 k. Now the Borrower wants to get a new credit of 1 M. What is the risk of crediting him the money he wants ? 
    Should you feel like in trouble, feel free to get in touch. Thank you

    Oscar Tagiyev, PhD 
  • Hello Johnny - there were 50 participants in the conference, ranging from top global institutions to a $900M USD community bank.  The conventional wisdom was a combination of a&b.  Many of the firms employed their own talent to model, build and integrate - and the running joke was that they kept hiring away one another's best modelers.  Some of the smaller banks used hosted to save time, energy and bandwidth in their IT/Risk departments - and cost really came up less than efficiency.  Although risk was monitored realtime, understand the reporting and action plans were revamped annually all the way down to monthly. 

    Johnny Huh said:

    Hi Michael,

     

    My questions are

    1) how are they building out this system?

    a) building in house

    b) buying off the self

    c) combination of a & b

    2) are there sufficient talent in house to model, to build, and to integrate?

    3) will hosted/managed service considered due to cost and if they do not have the expertise in house?

    4)  is end of day sufficient or due to dynamic of the market, strive towards real time as possible?  If'yes', what is the definition of real time? microseconds?

     

    Thank you.

  • Hi Michael,

     

    My questions are

    1) how are they building out this system?

    a) building in house

    b) buying off the self

    c) combination of a & b

    2) are there sufficient talent in house to model, to build, and to integrate?

    3) will hosted/managed service considered due to cost and if they do not have the expertise in house?

    4)  is end of day sufficient or due to dynamic of the market, strive towards real time as possible?  If'yes', what is the definition of real time? microseconds?

     

    Thank you.

  •  

    A) What current "published studies" have there been in "Hazard Chain Mismanagement" - as opposed to "Value Chain Management"  and ...

     

    B) Can an intelligent argument refute the following risk management premise:  All potential time-space fields of risk are i) seeded, ii) self-amplified and iii) sustained by the "Lack of timely information acted on."

     

    Thanks 

  • What would be the downside of electronically guaranteeing the reserves of the World Bank for a period of time--a year, for example.  This is what is being done with the financial institutions in the United States.  If there is a crisis and financial company reserves fall, the treasury replaces them with computer-generated dollars.   This is based upon the very simple concept that whatever disappears into the void should be retrievable from the void.  This remedy has not existed heretofore in such a secure form and may represent a quantum leap in the stabilizing of the world economy.

    Thank you

    Frank True

    Centennial, CO

  • Hi,

     

    I'd ask about systemic risks:

    What are the best practices for including systemic risks (such as systemic liquidity risk, risks arising from system's leverage etc) into ERM?

    Which systemic risks have been identified?

    How they are being measured/monitored?

    How systemic risks are taken into account e.g. in credit decisions and in pricing decisions?

    Assessments to the current levels of systemic risks?

     

     

    Br,

    Kristi Rohtsalu, analyst and financial blogger

    http://blog.logicoffinance.com/

    Latest articles: Sketching Sustainable Future for Finance; Global Finance and Economy: a Hot Summer Indeed

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