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Top 10 Risk Manual Articles

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.

Reducing variation in credit risk-weighted assets - The benign and vicious cycles of internal risk models

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_

Currently many countries are drowning in bad credits

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:

Google Summer of Code Ideas List Page

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.

In finance, it’s the best of times, it’s the worst of times

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

From Big Data, to Linked Data and Linked Models

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. 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 RiskForum for posting requires Open Risk registration.

Business Model Risk - The Forgotten Risk Type

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?

May the network be with you in 2016

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:

Back-to-basics is not salvation

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.

What Inka quipus teach us about data management

Chances are that your knowledge of ancient Peruvian culture is a bit rusty. Maybe you have some vague high-school memories of an extensive but backward empire that was conquered and then asset-stripped by a handful of Spanish conquistadores. Or maybe your best preserved memory is the excitement of reading von Daniken’s speculations that the Nazca lines are extraterrestrial spaceports. But unless you happened at some point later in life to hear about the work of Prof. Urton or his collaborators, most likely you have no idea what a quipu is (see image above).

Talk of unbundling the banks is all the rage these days (if we believe the chatter coming from fintech startups). Yet upon closer inspection one gets the feeling that these optimistic people might not necessarily know exactly what they are trying to unbundle, the true complexity of a medium-to-large bank, which in turn reflects, at least in part, the complexity of our modern Financial System .

Open source software is all the rage those days in IT and the concept is making rapid inroads in all parts of the enterprise. An earlier comprehensive survey by Gartner, Inc. found that by 2011 more than half of organizations surveyed had adopted open-source software (OSS) solutions as part of their IT strategy. This percentage may have currently exceeded the 75% mark according to open source advisory firms.

If you work in financial risk management you will most likely recognize where the following sentence is coming from:

One of the most significant lessons learned from the global financial crisis that began in 2007 was that banks information technology (IT) and data architectures were inadequate to support the broad management of financial risks. This had severe consequences to the banks themselves and to the stability of the financial system as a whole