Understanding Securities Industry Risk by Using the TowerGroup Risk Management Matrix
Stephen Bruel, Securities & Capital Markets
The securities industry is still in the business of risk, though the credit crunch has revealed that securities and investment firms did not avoid risk sufficiently. A revamp of risk management is clearly a top priority for firms throughout the industry, from retail brokerage firms to exchanges. Securities and investment firms will eventually revert to assuming risk, but they will need new tools, processes, and procedures to do so effectively. This TowerGroup Research Note discusses the types of risks that the each type of securities firm is grappling with and provides a framework for identifying and assessing risks and an approach to improve risk management.
Stress Testing and Scenario Modeling: Two Challenging and Dynamic Extensions to Risk Management
Guillermo Kopp, Rodney Nelsestuen, Bob McDowall, Strategies & IT Investments
Stress testing has become a mandate for financial services institutions, but differences in government and regulatory approaches will foster inconsistencies that threaten the efficacy of testing outcomes. In addition, challenges to obtaining the right information and being able to conceive of the right scenarios, model them, and take appropriate action make stress testing a less-than-perfect, albeit improved, science in a less-than-perfect world. What is certain, however, is that the results of stress testing will drive the direction of global markets and the industry itself.
Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience