Book description
Managing Extreme Financial Risk addresses the need for better management strategies in light of increased market risk and volatility in financial institutions' revenue models. Top officials from the financial and regulatory industries point to real corporate issues, showing how institutions react to financial crises. From first-hand experiences, they explain how effective sustainability management does not just prevent being blindsided; it also leads to proactive solutions that enhance an institution's strength to weather a sudden financial crisis, add significant shareholder value, and reduce systemic risk. Readable, coherent, and logical, Managing Extreme Financial Risk shows how extreme risk needs to be handled when the cost of being wrong means the difference between life and death of the institution.
- Based on the firsthand experiences and perspectives of senior-level executives
- Concentrates on extreme risk, when the cost of being wrong is not the loss of profits, but the death of the institution
- Written to be easily understood without algorithms, models, and quants
Table of contents
- Cover image
- Title page
- Table of Contents
- Copyright
- Dedicated to Walter B. Wriston
- Foreword
- About the Author
- About the Contributors
- Acknowledgments
- Introduction
- Prologue
-
Section 1: The Need for a New Approach to Tail-Risk Management
-
Chapter 1. Sustainability Management is Critical
- Abstract
- 1.1 Disciplined Emphasis on Protection from Extreme Operational Risk
- 1.2 No Similar Emphasis on Protection from Extreme Financial Risk
- 1.3 Absence of Objective Parameters Accounts for the Lack of Proactive Emphasis
- 1.4 Do Regulatory Requirements Address Effective Management of Tail Risk?
- 1.5 Stress Testing
- 1.6 Living-Will Provision
- 1.7 Liquidity Reserves
- 1.8 Going-Concern Management and Tail Risk
- 1.9 Is the Need For Tail-Risk Management New?
- Chapter 2. Tail Risk is the Culprit: Tail Wagging the Dog?
- Chapter 3. Need for a Distinct Focus on Tail Risk: In No Uncertain Terms
-
Chapter 4. Sole Focus On Traditional Risk Management Can Be Dangerous: Days of Future Passed
- Abstract
- 4.1 A Mature Industry
- 4.2 A New Driver of Revenues
- 4.3 Days of Future Passed
- 4.4 And Then a Blind-Side Blow
- 4.5 A False Sense of Security
- 4.6 Misplaced Use of Models
- 4.7 Missing Focus on Tail Risk
- 4.8 Regulatory Emphasis Encouraged Improper Use
- 4.9 Sole Focus on Traditional Risk Management—Driven By Statistical Models—Can Be Misleading
- References
- Chapter 5. Usefulness and Limits of Quant Models
-
Chapter 1. Sustainability Management is Critical
-
Section 2: Elements of Sustainaliblity Management
- Chapter 6. If you Can’t Measure it, You Can’t Manage it: Taming Something That’s Lurking Around
-
Chapter 7. Simplicity to Counter Complexities of Revenue Models
- Abstract
- 7.1 Decision Making Enhanced by Advances in Technology
- 7.2 Despite Technology and Quant Advances Human Decision Making Remains Simple
- 7.3 Decisions Regarding Unquantifiable Uncertainty Require A Different Approach
- 7.4 The Need for Simplicity is Critical In Complex Models
- 7.5 Post-2008 Developments Have Increased Complexity
- 7.6 A Simple Measure is Needed as Responding to Complexity with Complexity is a Recipe for Disaster
- References
- Chapter 8. A New Measure for Effective Sustainability Management: Probable Maximum Loss
- Chapter 9. Continuous Readiness is Critical: A senior executive who wishes to remain anonymous
-
Section 3: Implementation Issues and the Wide-Reaching Impact on Institutions and the Financial System
- Chapter 10. Effective Sustainability Management: From Top to Bottom
-
Chapter 11. Paradoxical Capital Problem
- Abstract
- 11.1 The Need for a Bigger Cushion is Real Because of the Increased Pressure on Capital
- 11.2 Increased Capital Solutions are Not Sustainable
- 11.3 Increased Capital Solutions are Not Realistic
- 11.4 A New Approach to Addressing the Need for a Bigger Cushion is Required
- 11.5 Sustainability Management Offers a New Solution by Alleviating the Pressure on Capital
- 11.6 Another Reason for a New Approach
- 11.7 A Change is Needed in How Capital is Deployed
- References
- Chapter 12. Capital as the Last Defense vs the First Defense
- Chapter 13. Tail Risk, Regulatory Supervision, and Systemic Risk: Missing Links
- Chapter 14. Convergence of Regulatory Objectives and Institutional Interests: Alignment of Goals to Enhance Sustainability and Reduce Systemic Risk
- Chapter 15. Telling Your Story Effectively to Alleviate Marketplace Anxiety
- Chapter 16. Critical Factors in Preparing for an Extreme Financial Crisis: A former senior executive who wishes to remain anonymous
- Chapter 17. From the Bane of the Revenue Model to a Competitive Advantage
- Chapter 18. Adapting Organizations to Effective Sustainability Management
- Epilogue
- Appendix. The Wall Street Journal
- Index
Product information
- Title: Managing Extreme Financial Risk
- Author(s):
- Release date: September 2013
- Publisher(s): Academic Press
- ISBN: 9780124172227
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