Risk Management in Financial Institutions: Formulating Value Propositions

Title page......Page 2
Table of contents......Page 8
Introduction to risk management......Page 16
Importance of risk management......Page 17
Implementation of risk management......Page 18
Summary......Page 20
References......Page 21
Risks in client relationships......Page 22
Know your client......Page 23
The process......Page 25
Summary......Page 27
References......Page 28
Integrity and ethics......Page 29
Effectively managing integrity norms......Page 30
Summary......Page 34
References......Page 35
Regulatory pressure......Page 37
Dealing with complexity: four best practices......Page 38
Structured methodology......Page 40
Summary......Page 41
References......Page 42
Risks in the building blocks......Page 44
Credit risk defined......Page 45
Problems in managing credit risk......Page 46
Elements of credit risk management......Page 47
Assessment of credit worthiness......Page 48
Credit risk modeling......Page 49
References......Page 51
Economic concepts......Page 53
Basel II: improving credit risk measurement......Page 55
Summary......Page 57
References......Page 58
Risk indicators defined......Page 59
Risk indicator characteristics......Page 60
Risk indicator definition process......Page 63
References......Page 66
Combining probability distributions......Page 67
Loss distribution, operational risk and expert judgment......Page 68
Combining probability distributions......Page 69
Improved effectiveness, efficiency and satisfaction......Page 71
Summary......Page 72
References......Page 73
Data scaling for modeling operational risk......Page 74
Loss distribution and statistics......Page 75
Experimental results......Page 77
Calculating the value-at-operational risk......Page 78
Summary......Page 80
References......Page 81
Hedge funds......Page 82
Description and performances hedge fund strategies......Page 84
Asymmetric Hedge Fund Returns......Page 86
Optimal Hedge Fund Portfolios......Page 87
Results......Page 88
Summary......Page 92
References......Page 93
Risks in running the business......Page 96
Operational risk management and scenario planning......Page 97
Scenario planning to support operational risk management......Page 98
Scenario planning to support integrated risk management......Page 100
References......Page 102
Solvency II framework......Page 104
SII attention points......Page 105
SII expected benefits......Page 106
Operational risk......Page 107
Examples of large incidents and failures......Page 108
Difficulties and challenges in insurers’ operational risk management......Page 109
Summary......Page 110
References......Page 111
Shared service center and operational risk......Page 112
Business case: a large insurance firm......Page 115
Make conscious choices......Page 116
Summary......Page 117
References......Page 118
Workflow management......Page 119
Multiple expert’s judgment approach......Page 120
Business case: semi-autonomous organization......Page 122
References......Page 123
Risk capital......Page 125
The Approach......Page 126
Discussion......Page 129
References......Page 130
Loss management for business as usual......Page 131
References......Page 136
Difficulties and challenges in operational risk management......Page 137
A way of working for scenario analysis......Page 138
References......Page 142
Expert judgment and group support systems......Page 144
Business case: Dutch financial institution......Page 145
References......Page 147
Definition of a value proposition......Page 150
The client ‘drives’ the value proposition......Page 151
Role of the senior risk manager......Page 152
Process of formulating value propositions......Page 153
Formulate the value proposition......Page 154
Deliver the value proposition......Page 156
References......Page 157
Authors index......Page 158
Curriculum vitae......Page 160