How New Regulations Are Breaking Down Silos. Part 1: Stress Testing
“Financial regulators have introduced stress testing as a means to cut across silos,” said Dan Travers, VP of Product Management, Adaptiv at SunGard and the opening speaker at a GARP webinar on May 21, 2013. Historically, he noted, financial risk has been treated as a set of separate units (or silos) across the main types of risk: credit, market, operational, and liquidity risk, the latter connected to asset-liability management (ALM). The new reporting demands of Basel III and Dodd-Frank serve to break down silos, Travers said, with such things as incremental risk charge being reported as capital percentage for the […]
Evolution of the OTC Swaps Markets. Part 2: Lessons Learned
The scramble to meet the Phase 1 deadline of new regulations on swaps “was a significant learning experience,” said Bis Chatterjee, Global Head of E-Trading, Credit Markets at Citi. He was the second speaker in a webinar panel organized by the Global Association of Risk Professionals (GARP) on May 14, 2013. The deadline that came into effect March 11, 2013 pertained to the Dodd-Frank Act governing over-the-counter (OTC) swaps. (Two more phases will follow; see Part 1 for details.) There were challenges first of all, Chatterjee said, in the self-identification of market participants in Phase 1. Second, even if you […]
Evolution of the OTC Swaps Markets. Part 1: “Futurization” of Swaps
Recent reforms to the swaps market can be thought of as “the futurization of swaps,” said Nathan Jenner, COO Fixed Income E-Trading at Bloomberg. He was addressing a webinar audience on May 14, 2013 as the first speaker in a panel organized by the Global Association of Risk Professionals (GARP) on the evolution of the market for over-the-counter (OTC) swaps. Five years ago, “derivatives were perceived as a catalyst in precipitating” the financial crisis of 2007-08, said Jenner. For example, it wasn’t immediately apparent who were all the counterparties to the AIG swaps. Pricing was “murky,” he said, and risk […]
Spotting Signs of Poor Corporate Governance. Part 2: ESG Management
Corporate governance is only one part of an overall phenomenon known as “ESG management,” or how a company handles environmental, social, and corporate governance (ESG) issues. “Research shows that companies that disclose more ESG information are more likely to enjoy a lower cost of capital,” said Max Zehrt, Senior Manager at Sustainalytics. He was addressing a noon-hour seminar of financial analysts and portfolio managers on the subject of corporate governance on May 8, 2013 at the offices of the CFA Society Toronto. His talk was the second part of a two-speaker panel moderated by Toby Heaps of Corporate Knights. Zehrt was […]
Spotting Signs of Poor Corporate Governance. Part 1: “Ask the Tough Questions”
“Good governance practices are important for the sound financial growth of a corporation—the board directs and protects,” said Stephen Kibsey, VP Equity Risk Management at Caisse de dépôt et placement du Québec. On May 8, 2013 he addressed a noon-hour seminar of financial analysts and portfolio managers through remote link on the subject of corporate governance at the offices of the CFA Society Toronto. His talk was the first part of a two-speaker panel moderated by Toby Heaps, co-founder and president of Corporate Knights. Kibsey pointed out that concern over matters like environment, social and governance (ESG) issues within a […]
Stress Testing: Part 2. The Next Generation
There are five key considerations for the “next generation” of financial stress testing, said Tom Kimner, Head of Americas Risk Practice & Global Risk Products at SAS. He was addressing a webinar audience on May 7, 2013 as the second speaker in a panel organized by the Global Association of Risk Professionals (GARP). Modern stress testing must be measured against the key considerations of performance, efficiency, completeness, transparency, and compliance. The goal of turning stress testing into an “early warning system seemed futuristic only a few years ago,” admitted Kimner at the outset of his talk. He contrasted the world […]
Stress Testing: Part 1. Balance Numbers and Narrative
“Uncertainty is a fundamental part of business. Major shifts occur without warning, triggered by a single event, or combination of unrelated, contemporaneous events,” said Sanjiv Talwar, Managing Director, Risk Capital & Stress Testing at Bank of Montreal. He was addressing a webinar audience on May 7, 2013 as the first speaker in a panel organized by the Global Association of Risk Professionals (GARP). He summarized the categorization of uncertainty by Courtney et al. in “Strategy Under Uncertainty”, Harvard Business Review. There is a variety of tools available to help manage the uncertainty, Talwar noted: option evaluation, game theory, pattern recognition, […]
Volunteer Appreciation Night
National Volunteer Week is a time to recognize the efforts of volunteers across Canada. This year it took place April 21 to 27, 2013 and we dropped by “Volunteer Appreciation Night” hosted by CFA Society Toronto on April 25, 2013 to view some fine magic entertainment by Revel Magic (see magician with flaming business card below), and to hobnob with volunteers. CFA Society Toronto has 17 different committees, plus a board of directors, so there is ample opportunity for community-minded members to find an area to which they can donate their time and talent. Following are interviews with three members of CFAST […]
Bed-Time Tales for Business Folk
It’s a book that invites browsing. Open it to a random page and immerse yourself in one small business story. Riffle to a spot twenty pages earlier and taste another. It’s a book that can be enjoyed by someone on the go, someone only has time for, say, a ten minute skim before the next appointment. After a few chapters (sampled in non-linear fashion) I was reminded of Grimm’s Tales. The archetypes of the business world, in particular the entrepreneurial world, are practically the same. The plucky maiden, the resilient hero, the marrow-sucking ogre, the chastened warrior: they are present […]
Measuring the ROI of GRC. Part 2: Solutions to “Absorb Regulatory Demands”
An unprecedented amount of new regulations “has led to risk assessment fatigue,” said John Kelly, Market Segment Manager in Business Analytics at IBM. He was the second of two speakers who addressed a GARP webinar audience on March 28, 2013 on the topic of the return on investment (ROI) on governance, risk assessment, and compliance (GRC). Most of the presentation referred to the study “Guidebook: Understanding the Financial Value of GRC Management” released in October 2012 by Nucleus Research that was talked about by Hyoun Park in the first part of the presentation. When it comes to regulation, there is […]