Martin Davies's Blog (92)

Unraveling Extreme Value Theory

An interesting request came through from one of our customers today and is worth sharing on the Causal Capital blog because a lot of risk practitioners struggle with some of the more complex areas of modelling uncertainty. This is especially the case when risk managers are attempting to assess the size of impacts from catastrophes.…


Added by Martin Davies on August 6, 2014 at 2:38pm — No Comments

Risk Appetite in IT operations

Assessing and measuring risk appetite away from an investment portfolio is perhaps one of the most difficult risk management initiatives practitioners have to entertain, it is also discussed often on risk forums and written about avidly by many consulting firms.

In this article we release a white paper that steps through the entire process of measuring and assessing…


Added by Martin Davies on July 21, 2014 at 4:37am — No Comments

Antifragile - Dose Response

In this posting we take a look at Nassim Taleb's video and show a working example of the Sigmoid function in R Project.

Many risk practitioners approach the quantification of risk by…


Added by Martin Davies on August 14, 2013 at 9:30am — No Comments

Ishikawa Diagrams Explained

Ishikawa Diagrams are often used to investigate how different risk factors can combine together to cause a specific outcome and are common techniques for quality control or defect inquires. The diagrams are quite popular because they are easy to understand and they can also be appraised by technical or non-technical managers alike.…


Added by Martin Davies on July 16, 2013 at 5:27pm — No Comments

A failing of risk appetite ...

A recent survey carried out by KPMG and the Economist Intelligence Unit finds that 81% of risk managers and executives fail to effectively capture risk appetite in their business models, what can we do?

In this blog posting I have linked to the new KPMG Expectations of Risk Management survey and included an infographic for…


Added by Martin Davies on July 11, 2013 at 9:47am — No Comments

Supply Chain Risk Management whitepaper ...

An interesting question was sent to me only the other day on Supply Chain Risk Management.

"Martin, do you have any specific risk frameworks or do you know of any good case studies that have been published on Supply Chain Risk Management (SCRM)?".…


Added by Martin Davies on July 9, 2013 at 12:47pm — No Comments

ERM Philippines

Enterprise Risk Management means alternate things to different people but the general angle risk analysts seem to take; is to create a risk assessment program or tick list sheet, then torture staff in their company to assess what they often don't fully understand.  This is fine but that is not Enterprise Risk Management in my opinion.  ERM is beyond simple risk assessments or check lists and it should consider…


Added by Martin Davies on May 10, 2013 at 7:00am — No Comments

The world is entering the abyss of a pandemic

If Dr Timothy Uyeki and Dr Nancy Cox from the Center for Disease Control have it right, the human world is sitting on the edge of biological catastrophe.

H5N1 (your "common" bird flu) is comparatively harmless when compared against H7N9, the new strain of avian flu and numerically speaking; the number of cases of H5N1 over…


Added by Martin Davies on April 15, 2013 at 3:59am — No Comments

Risk Dashboards

A recent debate between risk analysts on how to report risk, resulted in several suggestions…

Added by Martin Davies on March 25, 2013 at 5:13am — No Comments

Stress Testing Framework

Properly stress testing measures of risk is a complicated activity that few companies have done well. In this blog we take a look at a complete framework for stress testing.

The spreadsheet map can be downloaded from this […


Added by Martin Davies on March 16, 2013 at 12:15pm — No Comments

3 in 1 risk chart

A question from a client today kind of goes like this:

"Is it possible to plot three types of risk variables in one chart and if so, what kind of risk chart could we use to achieve this goal?"

This is an interesting query for sure and…


Added by Martin Davies on March 2, 2013 at 6:30am — No Comments

Risk Taxonomies

A recent poll on whether enterprise risk frameworks should employ a risk taxonomy or not, seems to have turned out an encouraging result. Over 93% of risk practitioners voting gave a thumbs up for risk categorisation, with only a handful of souls repelling the concept.

In this posting we look at four steps to bring a risk…


Added by Martin Davies on February 17, 2013 at 4:38am — No Comments

Two schools of thought for measuring op risk

I have been reading a lot of posts on many different risk forums of late and it appears that the Frequency x Magnitude argument for measuring operational risk, is a stubborn pandemic and a failing that is going to be nearly impossible to move on from.

How do we really measure operational risk?…


Added by Martin Davies on February 15, 2013 at 4:30am — No Comments

What is scenario analysis to op risk people?

Over the last few days, several people have discussed various scenario analysis techniques with me and going on general opinion, this risk assessment technique is very popular among operational risk analysts. Definitely no doubt there, but what scenario analysis means to one analyst, can often be something entirely different to another.…


Added by Martin Davies on February 9, 2013 at 10:05am — No Comments

10 Basel II operational risk successes and failures

The ten success stories of Basel II are not unique in anyway and there are plenty of other aspects to the Basel II initiative that supported an improved risk function in banks. None the less, these ten risk framework efforts seem to keep appearing as common "this is an excellent element to our risk framework and has evolved our risk management practice in the bank".…


Added by Martin Davies on February 2, 2013 at 5:30am — No Comments

Global Risks 2013

Well the time of year has come around again for the World Economic Forum and its various research publications on Risk Management. This year the whole program is dedicated to the theme of resilience.
In this short blog posting,…

Added by Martin Davies on January 19, 2013 at 5:30pm — No Comments

ISO 31000 supporting Basel II

On the G31000 LinkedIn risk forum, we have decided to open up a new "chat room" that is dedicated to the application of the ISO 31000 enterprise risk management standard to Banking, Insurance, Supply Chain Finance, Markets and Investment.

The link for the new group can be found by clicking the […

Added by Martin Davies on January 13, 2013 at 3:41am — No Comments

Performance and VaR together

A presentation that looks at how to apply Value at Risk in a trading environment alongside other performance reports.
A lot of market risk analysts often question how they can compare risk with return or the relevance of…

Added by Martin Davies on December 29, 2012 at 3:30am — No Comments

Addressing Procyclicality

Really good paper on procyclicality and the problems with Basel III countercycle buffers

Perhaps one of the biggest issues facing banks with Basel III is how to address Procyclicality, especially if the bank is not running an Advanced IRB credit risk framework. Actually, just obtaining information about the different accepted…


Added by Martin Davies on December 20, 2012 at 11:31am — No Comments

Monte Carlo working example

The effort today is to develop a Monte Carlo simulation in Excel that works for operational risk losses rather than market or credit risk, where the technique is so often found. The objective is to build a fully working Microsoft Excel model which isn't just statistical theory but actually exemplifies the Monte Carlo simulation process in practice.…


Added by Martin Davies on November 7, 2012 at 6:41pm — No Comments

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