Banking And Finance

Cross-sectoral review of group-wide identification and management of risk concentrations

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This paper builds upon prior work conducted by Joint Forum working groups in the area of
risk integration and aggregation
1
and aims to explore the progress that financial
conglomerates have made in identifying, m
easuring, and managing risk concentrations on a
firm-wide basis and across the major risks to which the firm is exposed.
In December 1999, the Joint Forum published its
Risk Concentrations Principles,
2
which
provided supervisors with principles for
ensuring through the regulatory and supervisory
process the prudent management and control of risk concentrations in financial
conglomerates. In November 2001, the Joint Forum published
Risk Management Practices
and Regulatory Capital: Cross-Sectoral Comparison
. This report noted a trend towards
convergence of sectoral approaches to risk ma
nagement and capital, while remaining neutral
as to the extent to which such convergence would increase in the future. The Joint Forum’s
August 2003 publication,
Trends in risk integration and aggregation
, observed two important
trends: (i) a greater emphasis on the management of risk on an integrated firm-wide basis;
and (ii) related efforts to aggregate risks through mathematical risk models. However, the
2003 paper noted that firms varied considerably in the practical extent to which important risk
management decisions were centralised and that risk aggregation methods were in the early
stages of development

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Language

English

ISBN/ISSN

92-9197-762-4

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NONE

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