The potential benefits of a comprehensive risk management framework have sent many companies chasing after the 'holy Grail' of enterprise-wide risk management (EWRM). Their objective is to be able to manage risks in an integrated fashion, across different business lines and risk types - at both operational and strategic levels.
Many industries are clearly convinced that there are significant benefits to be achieved in doing this. Research by PA's risk management consultants shows, for example, that banks that have fully implemented EWRM can deliver shareholder returns up to 10% pa greater than their competitors.
As each organisation has a unique set of goals, constraints (eg budgets) and existing conditions (eg business structure), any attempts to develop and implement a single EWRM 'solution' are doomed to failure. As leading risk management consultants, PA's experience is that a comprehensive series of projects is required to integrate existing systems, processes and practices into the key components of a tailored EWRM framework.
PA’s clients draw on our expertise in credit risk, market risk and operational risk:
Credit risk
While credit risk is most relevant to lending and trading institutions, any business with customers will face the credit risk of non-payment in some form such as receivables, leases and loans. Proper credit risk management includes having appropriate risk models, efficient credit processes, effective policies and controls, MIS reporting to monitor credit exposures, and portfolio management to optimise the risk-return profile of customers. Proper credit risk management ensures firms can reduce losses and price for profitability.
More about PA's credit risk expertise
Market risk
Despite being one of the more mature risk management practices, market risk remains elusive to many firms - especially in illiquid and volatile markets. Trading desks and A/LM functions across financial institutions and energy firms continue to suffer from significant losses due to hedge portfolios and speculative bets. A sound strategic plan for growth, along with good market risk management tools, will ensure trading desks are able to grow into the highly profitable capital markets business.
More about PA's experience in managing market risk
Operational risk
Operational risk remains the oldest but least understood of risks. It affects all companies and covers the people, process, and systems employed to run a business. Many of the recent newsworthy loss incidents and bankruptcies are the direct result of unmanaged operational risks and have cost firms billions that could have been mitigated or reduced in impact with a proper operational risk management programme in place. A proven framework of management policies, measurement tools and reporting is the basic groundwork all firms should seek to implement.
More about PA's skills in operational risk
