The purpose of our blog is to provide updates on important news and developments around Open Risk and a running commentary on external developments related to our mission.
You can view posted articles either from the front-page or by selecting the relevant post category or tag or tag from the right column. In our archive page blog entries are grouped chronologically.
Accounting probably would not count among the more glamorous of professions. The reasons for that status and whether it is justified are beyond the scope of this brief commentary.
What is interesting to note, though, is that the relative attractiveness of accounting is arguably improving, driven by a number of systemic societal developments:
2017 is shaping to be the year of #regtech, aka new technology startups setting up digital shop to help the financial services sector cope with its heavy regulatory burden. But what is regulation? Why is it a burden and how does it relate to real risks and risk management?
Much has been said about the impact of Big Data and high-end GPU Computing on the provision of digital financial services. At Open Risk we wanted to explore the boundary of what is possible at the diametrically opposite end of the cost spectrum:
What is the_absolutely minimum_cost for providing digital financial services? . In this post we begin the journey of finding out the answer to that question and it promises to be fascinating!
Fintech Risk Events is an open catalog of observed and publicized operational failures of fintech business models. The catalog aims to document, in due course, such events reasonably accurately, to allow risk managers understand the ( potentially new) vulnerabilities of new financial services models.
The scope of the operational risk database is Fintech companies. By that we mean newly established financial services providers that operate exclusively via new (digital) platforms and are (mostly) unregulated. The fintech sector is distinct from established financial services firms that operate with a mix of technology platforms and are (mostly) regulated.
The current list of Top 10 Risk Manual Articles, sorted by reader popularity covers a range of topics in risk management.
The Atlas was discovered recently in archaeological work studying pre-crisis civilizations. Despite the obvious wear and tear, all key risk failure areas have been preserved. We note the remarkable diversity of organizational forms and economic structures. Most interestingly, there is even an uncharted territory that was rumored to be inhabited by black swans.
March 2016 wasn’t a good month for so-called internal risk models, the quantitative tools constructed by banks for determining such vital numbers as how much buffer capital is needed to protect the savings of their clients.
ΝΒ: This is not a post about real whales and the ongoing struggle to keep these magnificent mammals alive for future generations to marvel at. Hopefully the individuals who have risked their lives to bring the near extinction of many whale species to worldwide attention will not take offense with us usurping imagery linked to this valiant campaign. We simply want to draw attention to another, rather more armchair type of campaign, namely: saving the_AMA risk model. A bit more esoteric as a cause, but ultimately a good cause nevertheless_
This visualization from the World Bank shows the current distribution of non-performing loans (NPL’s in short) around the world, as fraction of the total outstanding loans:
Over the course of the years we have seen many an open source project that we love and use daily participate as mentoring organizations in Google’s great communal activity. This year Open Risk applied to join the effort to promote open source, in particular as it applies in the less visited area of financial risk management.
It is a special moment to start a career in financial services. We are walking amid the ruins of the previous financial order. Fallen banks, broken markets, negative interest rates, shell-shocked economies and discredited theoretical assumptions. We see the enormous cost and impact to the welfare of society of a less than perfect financial system which has not kept pace with the advancement of our general knowledge and technical capabilities in most other domains.
The Top Ten list of why Silicon Valley cannot disrupt Wall Street (yet) was published first here in October 2014 and has been occasionally updated since
The big data problem:
As certainly as the sun will set today, the big data explosion will lead to a big clean-up mess.
How do we know? It is simply a case of history repeating. We only have to study the still smouldering last chapter of banking industry history. Currently banks are portrayed as something akin to the village idiot as far as technology adoption is concerned (and there is certainly a nugget of truth to this). Yet it is also true that banks, in many jurisdictions and across trading styles and business lines, have adopted data driven models already a long time ago. In fact, long enough ago that we have already observed how it call all ended pear shaped, Great Financial Crisis and all.
A stress testing methodology for analyzing FX lending risk. The methodology extends standard credit risk modelling tools to capture the increased risks of FX lending in a consistent way
One of the many good suggestions during early beta testing of the Open Risk website was to create a forum for risk management professionals to exchange news, ideas, opinions and general banter about their trade.
This led to the building and rolling out of the Risk Forum, which is now live and ready. Access to the Risk Forum for posting requires Open Risk registration.
Sustainable business models that demonstrate adequate profitability over long horizons are key to a healthy market economy. This applies to firms and organizations of any size and in any sector. But how do we determine what is sustainable and how can we tell a risky business structure from a stable one?
From Open Risk, to all our friends, colleagues, collaborators, users, partners and the public:
Financial services jobs continue being decimated. A recent (as of the initial post date) FT article was a sobering summary of the continuing transformation of the financial sector: 2015 alone has seen more than 10% reduction of the total workforce across large EU/US banks:
It has become trendy since the financial crisis to be wearing an anti-complexity hat in matters concerning the shape of the financial system. This is an understandable reaction to the entangled constructions that had sprung to existence in the hyper-leveraged markets of the naughty noughts.
Open Risk is proud to be funded by the FIWARE FINODEX accelerator!
Finodex, the European accelerator for ICT projects based on Open Data and FIWARE technologies, has already chosen over one hundred projects via two open calls for proposal.
This week the results of the second call evaluation closed in last September have been published, and 52 projects from a total of 297 have been chosen by a panel of experts. These projects will join the other 49 selected in the first open call.