Felix Salmon published a great article in Wired that looks at the Recipe for Disaster: The Formula That Killed Wall Street. The article looks at the widespread use of the Gaussian copula function. In assessing the risks in mortgage backed securities. The theory behind Gaussian copula function tries to overcome the difficulty in assessing the…
Category: Enterprise Risk Management
When Markets Turn
The Economist ran a special report on the future of finance last week. One item caught my eye – When Markets Turn: A Parable of How Modern Finance Can Go Wrong. The story looks back at the collapse of the Long-Term Capital Management in 1998. The article puts some of the lessons of that funds…
The Growing Importance of Enterprise Risk Management
Kyle McNabb writes about The Growing Importance of Enterprise Risk Management on his Forrester blog. In this article he lets us know about the things he learned after talking with a large number of professionals that work for or directly support executives responsible for compliance and risk management endeavors Boards and CFOs will prioritize initiatives…
Establishing an Integrated Risk Management Framework
Scott Kwarta, Director of Advisory Services at OpenPages, Inc., put together a presentation on Establishing an Integrated Risk Management Framework (.pdf). I like this depiction of the risk management cycle:
What is Enterprise Risk Management?
The Committee of Sponsoring Organizations of the Treadway Commission adopts this definition of Enterprise Risk Management: Enterprise risk management is a process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to…
Risk IQ
Sumner Blount and CA have coined the term Risk IQ to address a company’s risk management environment: Risk IQ – The Key to Effective Risk Management. The idea is deliver comprehensive, timely and accurate information to the decision makers to improve the decision-making process. They break the Risk IQ into two parts: visibility and insight….
Business Risk Intelligence
These are my notes from the OCEG webinar: Business Risk Intelligence. Carole Stern Switzer, President of OCEG Paul Shultz, Managing Director of Protiviti Dave Anderson, Senior Director of SAP Business Objects Paul frames the problem: Risk is often just an afterthought of strategy, resulting in strategic objectives that may be unrealistic and risk management being…
From Burden to Benefit: Making the most of regulatory risk management
The Economist Intelligence Unit published an executive briefing: From Burden to Benefit: Making the most of regulatory risk management (executive summary) (full report .pdf). It is an irony of modern business that regulation, a concept designed to reduce risk by protecting the interests of corporates, customers and society at large, has itself become one of…
Risk Mismanagement
I really enjoyed the story by Joe Nocera in the New York Times: Risk Mismanagement. The author focuses on the failures of risk management during the most recent financial crisis. The author starts with the failure of the VaR (Value at Risk) model used by many companies. He then moves on to the theories of…
Does Your D&O Policy Cover Criminal Investigations?
Kevin M. LaCroix of The D&O Diary weighs in on coverage of criminal investigations: D&O Insurance: Corporate Criminal Investigations. He references a December 2008 article by Patricia Bronte of Jenner & Block entitled D&O Coverage for Corporate Criminal Investigations (.pdf). The main issue is how your policy defines “criminal conduct.” Some policies defines it with…