Featured Column
FRM Corner
By: Alla Gil
Insightful commentaries on issues that are top of mind for financial risk managers, ranging from scenario analysis and stress testing to liquidity risk and portfolio optimization.
Rapid Stress Tests: A Solution for Quantifying the Impact of Tariff-Induced Volatility
May 9, 2025
Comprehensive scenario analysis, fueled by fast, top-down stress tests, can enable firms to project the effects of trade wars quantitatively – not ...
Read ArticleStriving for Stability Amid a Perfect Storm: How to Align Risk, Lending and Investing
March 28, 2025
Considering the current market turmoil, it is essential to maintain a consistent outlook across all major KPIs, including capital adequacy, liquidity ...
Read ArticleHow to Make Stress Tests More Constructive and Informative
February 28, 2025
The emphasis in the Fed’s 2025 CCAR exercise is on transparency, which demands a benchmarking approach free of potential bias. Exploring a broader ...
Read ArticleTokenization: Benefits and Risks
January 24, 2025
Tokenization is transforming previously illiquid markets by making them more accessible, securing ownership and enabling easy transfers. However, it ...
Read ArticleHow to Identify and Mitigate Hidden Risk Concentrations
November 8, 2024
Risk concentrations are unavoidable, but the ones that are concealed are the most dangerous. Which strategies can financial institutions employ to ...
Read ArticleThe Cash Management Impact of the Fed’s Rate Cut: How to Minimize Risk and Maximize Return
October 4, 2024
Changing yield-curve dynamics are going to have a significant effect on risk-return tradeoffs in cash management. In response to reduced interest ...
Read ArticleThe Risk and Return Profile of Index-Linked Annuities: How to Build the Optimal Portfolio
August 30, 2024
Complex financial products like registered index-linked annuities (RILAs) feature an array of risks and benefits. Evaluating all possible outcomes is ...
Read ArticleThe Stress Testing Road Ahead: How to Prevent Future Bank Failures
July 19, 2024
Today’s stress tests rely on antiquated approaches that do not consider the full spectrum of banks’ specific exposures to different macroeconomic ...
Read ArticlePreventing the Next Bank Failure: Lessons Learned from the Fall of Republic First
May 24, 2024
Coinciding with the post-COVID struggles of the commercial real estate (CRE) sector in the U.S., more regional bank failures could be on the horizon. ...
Read ArticleThe Budget Brain-Teaser: How to Optimize Capital
April 19, 2024
Markets can evolve rapidly, sometimes driven by unprecedented events, and financial institutions therefore cannot overrely on historical data for ...
Read ArticleStress Testing in 2024: Analyzing the Fed’s Newly Released Scenarios
March 1, 2024
The Federal Reserve this year requires banks to consider exploratory scenarios that factor in deposit runs and funding liquidity problems, among ...
Read ArticleSiri, What's My Stress Scenario?
January 19, 2024
Risk managers are in line to face a myriad of difficult challenges in 2024, ranging from geopolitical tensions to cyber threats to the growing impact ...
Read ArticleRedefining Financial Stability: Pros and Cons of New Regulatory Proposals
November 22, 2023
The Basel III Endgame and the Fundamental Review of the Trading Book are among the upcoming regulations that have unique limitations and advantages. ...
Read ArticleBalanced Risk Modeling: How to Better Prepare for Shocks
September 29, 2023
Risk managers need to worry about both idiosyncratic outcomes and systemic risks. An integrated, comprehensive modeling approach is the only way to ...
Read ArticleExhaustive Scenario Analysis: What Banks Can Learn From the Airline Industry’s Flight Simulations
August 25, 2023
Flying is hundreds of times safer than driving, thanks at least partly to comprehensive simulations performed by airline pilots. Banks that want to ...
Read ArticleHow to Improve Risk Oversight at Banks: A Three-Step Checklist
June 30, 2023
Boards of directors at failed banks knew little about their firms’ risk exposures. What steps can bank risk committees now take, and what information ...
Read ArticleStress Testing and Scenario Analysis: The Customization Challenge
April 28, 2023
Recent bank defaults have proved that “one size fits all” regulatory stress tests do not work. Are there practical ways of individualizing prescribed ...
Read ArticleRisk Management Lessons Learned From SVB
March 17, 2023
Now is the time for risk managers to address the critical questions that matter for the banking industry: Was the failure of SVB preventable, what ...
Read ArticleManaging Liquidity Risk and Funding Costs During a Crisis
February 24, 2023
Liquidity risk can spin out of control amid an extreme event. But financial institutions can take a three-pronged, multi-scenario approach to assess ...
Read ArticleHow to Model Forward-Looking Credit Risk
January 27, 2023
During uncertain times, the traditional approach for estimating expected credit losses simply doesn’t work. However, while forecasting ECL is a ...
Read ArticlePension-Fund Risk: How to Improve Liquidity Management
December 9, 2022
Recent events have shown that simply having a plan to cover liabilities will not necessarily prevent a financial disaster. What missteps did U.K. ...
Read ArticleStress Testing Integration: How to Combine Capital and Liquidity
October 21, 2022
Though the importance of integration is now widely understood by financial institutions, stress testing of capital and liquidity is still typically ...
Read ArticleCalculating the Capital Buffer in Volatile Times: How Much is Enough?
September 30, 2022
In a market replete with extreme events and great uncertainty, it’s very challenging for a financial institution to determine the optimal size of its ...
Read ArticleStrategic Risk: How to Select Critical Future Scenarios
August 19, 2022
Risk modeling needs a new approach. That’s one thing that model developers, model users and senior management can all agree upon – but what, exactly, ...
Read ArticleWealth Management: Is It Too Late for Early Warnings?
July 29, 2022
As we prepare for the next wave of geopolitical and economic shocks, and even a potential recession, should money managers stay the risk management ...
Read ArticleThe Stagflation Challenge: How to Future-Proof Liquidity Risk
June 24, 2022
When financial markets are in turmoil, liquidity is the most critical indicator of a firm’s financial health. What steps can financial institutions ...
Read ArticleHow to Manage Balance-Sheet Risk in Volatile Times
May 27, 2022
Given the looming prospect of a recession, it’s critical for financial institutions to strengthen their balance sheets. To meet this objective, firms ...
Read ArticleThe Next Frontier in Risk Management: How to Achieve Digitalization
April 29, 2022
New technologies are on the horizon that can potentially revolutionize ALM, stress testing and broader risk management functions. What steps can your ...
Read ArticleIERM: How to Build a True Risk-Business Partnership
March 18, 2022
Achieving integrated, enterprise-wide risk management is quite difficult, as it typically requires the wholesale reorganization of systems, platforms ...
Read ArticleStrategic Asset Allocation: Analyzing Risk to Drive Return
February 18, 2022
To estimate portfolio returns properly, asset managers must include the full range of risks when building their investment strategy.
Read ArticleRisk vs. Return: How to Weigh the Pros and Cons of Alternative Investments
January 21, 2022
Are the benefits of alternative investments worth the risks? The best way to optimize the addition of these typically illiquid assets to your ...
Read ArticleThe Uncertainty of Inflation Risk
November 19, 2021
Everyone is worried about how bad inflation could get and how long it could last. While no one can predict an exact scenario, it is possible to ...
Read ArticleThe Alternative Data Craze: Peering Behind the Curtain
October 22, 2021
To enhance returns, develop dynamic risk limits and beat competition, asset managers and hedge funds are increasingly turning to alternative data. ...
Read ArticleHow Effective are Your Scenarios?
September 24, 2021
Though their applicability differs across business functions, risk-neutral and real-world scenarios both play an integral role in projecting future ...
Read ArticleWhat’s Missing in Asset and Liability Management?
August 26, 2021
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Read ArticleHow to Stress Test for Extremely Unexpected Scenarios
July 23, 2021
Since no single market shock is a mirror reflection of a previous one, is it still possible to stress test for unprecedented events? Not exactly, but ...
Read ArticleHow to Mine Synthetic Data: Pros and Cons of a Shiny New Tool for Risk Managers
June 18, 2021
Synthetic data has emerged as a popular supplement for risk modelers who have grown frustrated with the limitations of historical data and desire ...
Read ArticleRisk Drivers and Revenue Forecasting: A Brave New World
May 21, 2021
In response to the pandemic, risk and finance functions have had to reconsider what factors are driving revenues and what scenarios they should ...
Read ArticleRisk Management in a Sea of Unknown Unknowns: The Complex Quest for Resilience
April 23, 2021
Forecasting is one of the most critical challenges faced by the risk community today. What steps can banks take to better mitigate current risks, ...
Read ArticleHow to Prepare for Future Crises: A Multi-Scenario Approach to Tail Risk
March 26, 2021
Financial institutions must be ready for all events, including unprecedented ones. A multifaceted scenario analysis technique can enable firms to ...
Read ArticleCredit-Loss Forecasting: A Practical Guide to CECL Implementation in Uncertain Times
February 26, 2021
Pandemic-driven historical data deficiencies now plague banks that must comply with the CECL accounting standard. But there are steps they can take ...
Read ArticleCyborg Model Validation
January 22, 2021
In 2020, structural problems caused the downfall of many perfectly-validated models. For models to be better prepared for the next unknown, they need ...
Read ArticlePutting Stress Tests in the Blender
October 23, 2020
Amid the pandemic, the Fed recently ordered large banks to perform a second round of stress tests, leading to questions about whether CCAR should be ...
Read ArticleCredit Risk Management in a Pandemic Era
August 28, 2020
The dramatic economic impact of COVID-19 has yielded a plethora of credit risk challenges related to unemployment, debt and bankruptcies. What steps ...
Read ArticleCOVID-19 Contagion: Why Risk Managers Need a More Aggressive Approach to Economic Recovery
May 29, 2020
To contend with unexpected, pandemic-driven events - including historic unemployment and looming credit defaults - risk practitioners must take ...
Read ArticleCOVID-19: Emerging Credit Risk Challenges for Main Street Business Lending
May 1, 2020
A significant rise in non-performing assets is one of the expected consequences of the coronavirus pandemic. Today, even with government programs ...
Read ArticleHow to Improve Culture, Governance and Accountability: Proactive and Practical Actions
March 6, 2020
Despite talk of progress, financial institutions have been fined hundreds of billions of dollars for corporate malfeasance since the global financial ...
Read ArticleThe History of Risk Management: 30 Centuries of Innovation
March 22, 2019
From fair value to portfolio theory to EVT, VaR and the Basel accords, financial risk management has been shaped by threshold events for the past ...
Read ArticleThe Best Tool for Operational Risk Management
February 22, 2019
Properly-executed case studies can help financial institutions ward off operational risk disasters. What should a good operational risk case study ...
Read ArticleMarket Risk: The Road Ahead
January 31, 2019
Following the release of the latest Basel standard for market risk, the boundary between the trading book and the banking book allocations for ...
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