Risk Management At The Top

About the Author xiii 1 Introduction 1 1.1 Introduction 2 1.2 Boards 3 1.3 Why Now? 5 1.4 Rest of the Book 7 Further Reading 9 PART I RISK OVERSIGHT 11 2 Risk - An Overview 15 2.1 Terminology 16 2.2 Role of Banks and Risk 22 2.3 Sources of Risk and Uncertainty 25 2.4 Capital 28 2.5 Issues to Consider 34 Further Reading 35 3 Risk Oversight 37 3.1 Introduction 38 3.2 Perspective 39 3.3 Models 43 3.4 Risk Framework 45 3.5 Biases 54 3.6 Issues to Consider 56 Further Reading 57 4 Risk Management 59 4.1 Introduction 60 4.2 Terminology and Components 61 4.3 Risk Management Cycle 65 4.4 Issues to Consider 73 Further Reading 74 5 Risk Appetite 75 5.1 Introduction 76 5.2 Terminology and Concept 77 5.3 Stakeholders 79 5.4 Expressions of Risk Appetite 82 5.5 Framework 87 5.6 Risk Reporting 91 5.7 Issues to Consider 94 Further Reading 95 6 RiskCulture 97 6.1 Introduction 98 6.2 Terminology 100 6.3 Assessing and Influencing Risk Culture 108 6.4 Monitoring Risk Culture 117 6.5 Issues to Consider 118 Further Reading 119 PART II SPECIFIC RISKS 121 7 Credit Risk 125 7.1 Introduction 126 7.2 Definition of Credit Risk 127 7.3 Framework 130 7.4 Risk Appetite Metrics 134 7.5 Credit Risk Management 149 7.6 Issues to Consider 158 Further Reading 158 8 Market Risk 159 8.1 Introduction 160 8.2 Definition of Market Risk 161 8.3 Market Risk Framework 164 8.4 Market Risk Estimation 171 8.5 Market Risk Management 183 8.6 Issues to Consider 188 Further Reading 188 9 Operational Risk 191 9.1 Introduction 192 9.2 Definition of Operational Risk 193 9.3 Operational Risk Framework 196 9.4 Operational Risk Estimation 202 9.5 Operational Risk Management 208 9.6 Issues to Consider 213 Further Reading 214 10 Liquidity Risk 215 10.1 Introduction 216 10.2 Definition of Liquidity Risk 217 10.3 Liquidity Risk Framework 220 10.4 Liquidity Risk Measurement 224 10.5 Liquidity Risk Management 229 10.6 Issues to Consider 233 Further Reading 234 11 Other Risks 235 11.1 Introduction 236 11.2 Reputational Risk 237 11.3 Strategic Risk 239 11.4 Business Risk 241 11.5 Other Market Risks 242 11.6 Model Risk 244 11.7 Supplier Risk 247 11.8 Resources 249 11.9 Issues to Consider 251 Further Reading 252 12 Risk Interactions 253 12.1 Introduction 254 12.2 Risks as Frequency and Severity Drivers 256 12.3 Risk Interactions 259 12.4 Implications for Risk Management and Measurement 266 12.5 Issues to Consider 269 Further Reading 269 PART III REGULATORY ENVIRONMENT 271 13 Regulatory Environment 275 13.1 Introduction 276 13.2 Structure of Prudential Regulatory Process 277 13.3 Scope of Prudential Regulation 286 13.4 Regulatory Influence 299 Further Reading 303 Disclaimer Regarding Excerpts from S&P Materials 305 Index 307