The failure of Risk Management is manifold.
Only a day earlier I was in conversation with a treasury market dealer, who runs a fixed income, bond derivatives and call /clean rates desk at a leading global bank.
I was surprised to note that he didn't factor risk into decisions!
Only a day earlier I was in conversation with a treasury market dealer, who runs a fixed income, bond derivatives and call /clean rates desk at a leading global bank.
I was surprised to note that he didn't factor risk into decisions!
Upon my inquiring, he told me that he made placements, without actually computing Risk Adj. Return for any of the fixed-rate drove asset classes or potential exposures.
His targeted profitability metric is the market yield aka IRR for bonds and bullet rates for MM Placements.
His targeted profitability metric is the market yield aka IRR for bonds and bullet rates for MM Placements.
So, I insisted on asking further, as to what role was the risk department playing at the bank, and why nobody taught him how to compute and understand RAROC family?
Why treasury front office didn't comply with the risk budgets, etc?
Why treasury front office didn't comply with the risk budgets, etc?
well, his answer was not melodramatic, but, very much expected!
We are not risk managers and Risk Management never asks us to attend Basel Trainings.
We square our MM /FX books and meet liquidity and financial return targets as advised to us by the ALCO.
We are not risk managers and Risk Management never asks us to attend Basel Trainings.
We square our MM /FX books and meet liquidity and financial return targets as advised to us by the ALCO.
Continuing with the above thread!
So, I believe risk management models used by the risk desk/units, should be properly explained to the front and back-office users.
Front office traders/dealers, coupled with back-office accountants reporting to the CFO, should be on the same pg
So, I believe risk management models used by the risk desk/units, should be properly explained to the front and back-office users.
Front office traders/dealers, coupled with back-office accountants reporting to the CFO, should be on the same pg
How can the front office, the middle office and the back office speak the same language and understand the connotations, jargon, technicalities, terminologies, taxonomies, and semantics, etc. If they are not trained together?
An #ERM program must remove the silo culture!
An #ERM program must remove the silo culture!
The purpose of Risk Management should be clearly spelt out at financial institutions.
The Risk should do three things=>
1. Devise a common language
2. Speak a common language
3. Understand and know how to communicate during normal times and escalate when things go haywire!
The Risk should do three things=>
1. Devise a common language
2. Speak a common language
3. Understand and know how to communicate during normal times and escalate when things go haywire!
The biggest risk management failures are the lack of applying importance to strategic risk communications in day-to-day problem-solving,
not inculcating a risk culture across the 3-LOD Model, and lastly not aptly cataloguing risk, crisis, and extreme disaster hazardous events
not inculcating a risk culture across the 3-LOD Model, and lastly not aptly cataloguing risk, crisis, and extreme disaster hazardous events
So we cannot blame the front office risk-takers if the risk managers do not ensure compliance with the regulatory program!
Risk Teams should train the Risk Takers, so that the latter may use both complex models and heuristics, to firefight at least the Known Known Risk Incidents
Risk Teams should train the Risk Takers, so that the latter may use both complex models and heuristics, to firefight at least the Known Known Risk Incidents
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