Featured Column
Modeling Risk
By: Cristian deRitis
Insightful commentaries on the latest news, trends and best practices in credit modeling, stress testing, inflation, interest-rate risk, consumer credit, insurance and geopolitical risk, among other modeling-related topics.
The EU AI Act: A Risk Manager's Roadmap
June 6, 2025
New regulation in Europe should motivate financial risk institutions across the globe to rethink how they build, deploy and govern AI-driven models. ...
Read ArticleDancing with Uncertainty: A Risk Manager’s Guide to Dealing with Market Volatility
May 2, 2025
A combination of constantly shifting tariffs, interest rates and monetary policy has created a perfect storm of risk. What fundamental changes do ...
Read ArticleEconomic Sanctions for Risk Managers: A Cautionary Tale
April 4, 2025
A proactive, sophisticated approach to compliance is required to manage dynamic sanctions and their associated financial, reputational and ...
Read ArticleWildfire Risk Implications for Property and Insurance Markets
March 7, 2025
Calls for changes in risk-based insurance pricing, regulation and risk modeling have grown louder in the aftermath of California’s devastating ...
Read Article5 Risk Predictions for 2025
January 10, 2025
Rising threats in cybersecurity, regulation, insurance and climate, global debt, and the supply chain are among the risk challenges that could be ...
Read ArticleRising Waters: Navigating the Future of Flood Risk and Insurance
December 6, 2024
Floods in the U.S. have increased in severity, frequency and volatility. How is this impacting homeowners, insurers, lenders and asset managers with ...
Read ArticleCharting the Future of Consumer Credit Risk
November 8, 2024
Credit risk managers who want to get ahead of the curve must understand the areas of consumer credit that are of the greatest concern in 2025. What ...
Read ArticleMitigating Risks to the Supply Chain: A Risk Manager's Guide
October 4, 2024
Volatility in the global supply chain has been ramped up by geopolitical threats, labor strikes, trade tensions between countries, natural disasters, ...
Read ArticleIgnore, Acknowledge or Advocate: How Risk Managers Should Handle Political Risk
September 6, 2024
Politics impact every financial institution’s bottom line and risk profile. How important is it for firms to adapt to this constantly evolving ...
Read ArticleThe Fed’s 2024 Stress Test: Key Takeaways
July 3, 2024
The good news is that the commercial real estate market is not projected to crater and that large U.S. banks have enough capital to survive another ...
Read ArticleHow to Mitigate Risk and Improve Decision-Making via Probabilistic Thinking and Rare Events Modeling
June 7, 2024
Risk managers must acknowledge the role that chance plays – particularly in extremely unlikely events – to reduce risks and to make better, more ...
Read ArticleManaging Inflation Risks: A Practical Guide
May 2, 2024
Price hikes and price uncertainty can have a huge impact on spending, investment, loan origination and, ultimately, default risk. But what tools can ...
Read ArticleWhen Insurance Becomes a Risk Factor
April 5, 2024
Insurance products can help mitigate and properly distribute risks, but also often come with perverse incentives that can work against risk managers. ...
Read ArticleHow to Take the Stress Out of Stress Testing
March 1, 2024
All banks that are subject to this year's annual stress test from the Federal Reserve are expected to have sufficient capital to pass, despite the ...
Read ArticleHow to Measure and Model the Multi-Layered Threat of Cyber Risk
February 2, 2024
Risk managers working in the cybersecurity arena face the daunting task of identifying, analyzing and evaluating a variety of idiosyncratic risks. To ...
Read Article5 Risk Predictions for 2024
January 5, 2024
Inflation, commercial real estate volatility, cyberattacks, geopolitical threats, social unrest, and extreme weather events are among the risks that ...
Read ArticleNavigating and Managing Geopolitical Risks
December 1, 2023
Fueled by the ongoing Israel/Hamas and Russia/Ukraine conflicts, headline-grabbing geopolitical threats are a source of significant concern for ...
Read ArticleCan Banks Reliably Estimate Credit Losses?
November 10, 2023
Financial institutions have improved their ability to forecast losses, thanks to better models, impactful regulations and voluminous, higher-quality ...
Read ArticleTransforming Risk Management with Generative AI
October 6, 2023
The next generation of AI is not flawless but could very well be used to identify and rank threats, democratize data and analytics, and improve ...
Read ArticleThe Impact of Evolving Central Bank Digital Currencies on Banks and Risk Management
September 1, 2023
Digital currencies developed by central banks may be the wave of the future, but still face significant barriers to entry. Are CBDCs a threat to ...
Read ArticleTraditional vs. Fixed Analysis: Weighing the Pros and Cons of An Alternative Approach to Scenario Design
August 4, 2023
For decades, to better manage uncertainty and make more accurate forecasts of losses, financial institutions have relied on a multi-scenario strategy ...
Read ArticleA Midyear (Global) Report Card: Economic Trends, and Ongoing and Emerging Risks
July 7, 2023
Economies across the world have bucked predictions and avoided recessions this year, but significant risks remain. How do U.S. economic developments ...
Read ArticleRisk is Everybody’s Business: Moving Toward Integrated Risk Management
June 2, 2023
Risk modelers, accountants and economists must collaborate closely to collect more timely and accurate data, to improve decision making and to enable ...
Read ArticleTed Lasso’s Guide to Risk Management: Finding Purpose and Meaning
May 5, 2023
How can CROs tap into the full potential of their risk teams, while simultaneously building comprehensive cultures of risk awareness that help ...
Read ArticleSVB and Signature Bank: Risk Management Revelations
April 6, 2023
Recent bank collapses can be traced to their narrow-minded approach to stress testing and scenario analysis. What exactly went wrong at these ...
Read ArticleMeasuring and Modeling Residential Real Estate Risk in Unprecedented Times
March 3, 2023
Risk modelers in the mortgage industry now face significant obstacles, thanks in part to rising interest rates, high inflation, stagnant growth and a ...
Read ArticleClimate Risk Stress Testing and the Role of Central Banks
February 3, 2023
Proponents and detractors have already weighed in on the Federal Reserve’s news climate scenario analysis exercise, which is designed to help banks ...
Read Article5 Risk Predictions for 2023
January 6, 2023
In the coming year, we can expect a slowdown in worldwide economies, an increased emphasis on operational resilience, a shift toward simpler and more ...
Read ArticleRisk Managers’ Role in Expanding DEI Opportunities
December 9, 2022
Minority-owned businesses offer financial institutions an excellent chance for expansion and for improved return on investment, but insufficient ...
Read ArticleThe Holiday Season Outlook for Credit Risk
November 4, 2022
To predict bank credit losses more accurately, in an environment of high inflation, falling output and rising interest rates, risk managers need to ...
Read ArticleWall Street Warms to Tokenization
October 28, 2022
Although still at an early stage, blockchain technology is proving capable of streamlining issuance and settlement of financial instruments
Read ArticleThe Risk Matrix Approach: Strengths and Limitations
October 7, 2022
The RMA is an effective and intuitive technique used by risk managers to prioritize threats to their organization in a graphic manner – but it’s not ...
Read ArticleDecoding Country Perils: The Nature and Causes of the Risk of Nations
September 2, 2022
What are the best indicators of short- and long-term country risk, and what steps can firms take to identify, assess and manage this multi-layered ...
Read ArticleA Date with Destiny: The Importance of Demographics for Risk Modelers
August 5, 2022
Over the next five years, credit risk could be significantly impacted by worldwide population changes that are being driven by migration, ...
Read ArticleLet’s Get Real: Managing Consumer Credit Risk in a Time of Inflation
July 1, 2022
Amid volatile global markets rife with high interest rates and rising inflation, banks issuing loans today face myriad risks that present unique ...
Read ArticleWill the Housing Bubble Pop or Fizzle?
June 3, 2022
Risk managers need to analyze trends in a changing real estate market, but what models should they use and what are the key factors they need to ...
Read ArticleCalibrating Recession Risks
May 6, 2022
Thanks to escalating inflation and changing monetary policies, the chances of another dramatic downturn have grown significantly. To determine the ...
Read ArticleRussia/Ukraine Fallout: Mitigating and Managing a Multitude of Risks via KYC
April 22, 2022
Russia’s invasion of Ukraine has created a new set of challenges for FRMs, who are tasked with both protecting the reputation of their employers and ...
Read Article2022 Stress Testing Expectations
March 4, 2022
The Fed’s CCAR stress-testing exercise for this year covers harsher economic conditions, but does not assume what would happen to loan defaults if ...
Read ArticleThe Joys and Perils of Spreadsheet Models
February 4, 2022
Excel-driven financial risk methodologies are convenient and fast – but also vulnerable to human errors. Financial institutions can mitigate the ...
Read Article5 Risk Predictions for 2022
January 14, 2022
Risk managers can expect to face many obstacles over the next year, but what are the key trends, opportunities and challenges that are likely to keep ...
Read ArticleTail-Risk Reduction Through Resilience
December 3, 2021
While the risks of extreme events can never be completely eliminated, they can be ameliorated with the help of ESG-focused models that are flexible ...
Read ArticleWhat Time Is It? Practical Considerations for Risk Modelers
November 5, 2021
Credit risk modeling is an art that is heavily influenced by time horizons, forward-looking markets and the frequency of forecasts. Modelers who do ...
Read ArticleMortgage Risk: Are Escalating Home Prices Dangerous or Defensible?
October 1, 2021
It's possible we may now be experiencing a housing bubble similar to the 2007-08 crisis. To eliminate or at least mitigate the risk of incurring ...
Read ArticleDigital Currencies: Risks and Opportunities
September 3, 2021
Cryptocurrencies are surging in popularity, but whether they will ever go mainstream depends on factors like price stability, ease of use and ...
Read ArticleCyber Risk Economics: Building Exposure Into ERM
August 26, 2021
Cyberattacks are on the rise, inflicting significant damage to financial institutions' bottom line. But there are steps that firms can take to ...
Read ArticleClimate Risk: Forecasting, Policy and Scenario Analysis Challenges
July 9, 2021
In the wake of the release of new central bank scenarios for climate risk, financial institutions are now fully engaged in the difficult task of ...
Read ArticleThe Complexities of Modern Risk Forecasting: Anticipating the Anticipation Economy
June 4, 2021
Today, thanks in part to precise, AI-driven algorithms, financial institutions are now expected to foresee both the specific needs and risks of their ...
Read ArticleWhat's Next? A Guide to Managing Inflation Risk
May 7, 2021
In a constantly-evolving economic environment rife with uncertainty, it's tough for risk managers to get a proper read on the outlook for inflation. ...
Read Article5 Post-Pandemic Lessons for Risk Managers
April 1, 2021
In the aftermath of COVID-19, what trends will shape the future of the risk management industry? To better identify and address emerging risks, ...
Read ArticleStress Testing in Volatile Times: A Logical Approach
March 5, 2021
Managing tail risk amid a crisis is a very difficult task, but banks that use proper stress scenarios can meet this challenge. Unemployment data ...
Read ArticleToo Much of a ‘Good Thing': How to Manage Government Stimulus Risk
February 5, 2021
Amid the pandemic, small businesses and unemployed households have received much-needed aid from government-support programs. But credit cannot be ...
Read ArticleThe Hope and Challenge of Vaccines: Implications for Credit Loss Forecasting
January 8, 2021
As optimism rises about potential COVID-19 remedies, risk modelers need to consider the impact of this development on the economy, adjusting their ...
Read ArticleWhat Lies Ahead: Credit Risk Under a Biden Administration
December 4, 2020
As we transition into a new political era, risk managers are likely to face novel challenges stemming from regulatory revisions that will cover ...
Read ArticleCOVID-19 Lessons Learned: Nonbinary Risk and the Power of Organization
November 6, 2020
What has the pandemic taught us about decision-making and risk management? There is no panacea for all of the problems witnessed during the crisis, ...
Read ArticleCECL and CCAR Updates: COVID-19 Effects, and the Future of Risk
October 2, 2020
The end of the third quarter has brought with it some new challenges for banks that must report expected credit losses and comply with a novel set of ...
Read ArticleThe End of Credit Scores?
September 4, 2020
The pandemic is illuminating flaws in traditional consumer credit assessment methodologies. Will we therefore see the emergence of open-sourced ...
Read ArticleCOVID-19 Broke My Credit Loss Model
August 14, 2020
Credit modeling teams across the U.S. are now reconstructing and refitting their forecasting models. Historically, huge upticks in joblessness have ...
Read ArticleWill COVID-19 Kill CECL?
July 10, 2020
The difficulty of projecting expected credit losses has been greatly increased by coronavirus-driven economic volatility and uncertainty.
Read ArticleManaging the Risk Multiverse with Scenarios: How to Be Better Prepared for the Next Pandemic
June 5, 2020
COVID-19 has demonstrated the folly of a precise, single-scenario-driven approach to loss forecasting. To avoid underestimating future tail events, ...
Read ArticlePandemic Fallout: The Risk of Reopening Too Early or Too Late
May 15, 2020
Restarting the economy is a monumental task fraught with potential wrong turns, but standard risk management practices can provide helpful guidance. ...
Read ArticleWhen Risk Management Turns into Crisis Management
April 9, 2020
COVID-19 has turned the world upside down. Risk managers have a vital role to play in economic and societal recoveries, not just now but in the ...
Read ArticleStress Testing, CECL and Coronavirus: The Importance of Telling the Story Behind the Numbers
March 6, 2020
The modern risk manager must juggle everything from cyber risk to fraud to credit loss estimates to pandemics and other tail risks. Projecting the ...
Read ArticleHow to Become a Better Risk Modeler: Debating the Validity of Significance Tests
January 17, 2020
Models are typically built using a plethora of statistical tests, but, because of the arbitrary nature of what is considered a 'failure,' negative ...
Read ArticleDriverless Cars, and the Prospect of Level 5 Automation in Banking
December 13, 2019
Financial institutions have already achieved a fairly high level of automation, and appear poised to take the next step via artificial intelligence ...
Read ArticleHow Will Climate Change Impact Banks?
November 15, 2019
Climate change is likely to both disrupt the financial services industry and yield opportunities for it. To develop effective climate risk stress ...
Read ArticleConservative Banks Do Not Need Conservative Models
October 11, 2019
The trends toward more capital, inflated loss estimation and cautious underwriting are understandable, but smart financial institutions embrace a ...
Read ArticleModel Validation Need Not Be a Blood Sport
September 13, 2019
The traditional build-and-validate modeling approach is expensive and taxing. A more positive and productive validation experience entails competing ...
Read ArticleWill CECL Ultimately Be Worth All the Fuss?
August 9, 2019
FASB's new accounting standard should expand the application of analytics and yield higher-quality data on expected credit losses, but may also ...
Read ArticleClimate Change Stress Testing
June 7, 2019
Faced with mounting pressure from regulators, banks should collect lots of data to weigh different climate risk scenarios.
Read ArticleHuman Versus Machine: The Pros and Cons of AI in Credit
May 17, 2019
How does artificial intelligence measure up with human judgment and existing statistical assessments of credit risk? While AI is certainly on the ...
Read ArticleInformation Overload: The Risk Documentation Challenge
February 8, 2019
Banks today provide supervisors with reams of data to confirm the validity of their risk models and to avoid regulatory rebukes. But voluminous ...
Read ArticleCECL, IFRS 9 and the Demand for Forecast Stability
January 11, 2019
Loan-loss provisioning models must take a variety of economic and client factors into account, but, with the right approach, banks can develop ...
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