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David R. Koenig's Blog

Qualified Risk Director Guidelines Released for Better Oversight of Risk by Boards of Directors

June 6, 2013 Comments (0)

The Directors and Chief Risk Officers group (“the DCRO”) today issued its guidance to organizations seeking to better govern risk through the identification and recruitment of Qualified Risk Directors to their boards of directors and risk committees of the board. In the spirit of the Audit Committee Financial Expert, where specific board members are designated as experts in the analysis of financial statements and control processes, the QualifiedRisk Director guidelines were developed by an...

Crisis Sentiment Index Improves by 5 Points in December; Still More than 40 Points Away from Normal Conditions, But Some Positive Signs Emerging

January 4, 2013 Comments (0)

The Crisis Sentiment Index (CSI) is a regular assessment of the status of the financial/economic crisis around the world by senior executives and board members who are involved in risk governance. Reported on a scale of 0 to 100, a reading of 75 indicates “normal conditions.” For December 2012, the Crisis Sentiment Index (CSI) improved five points to a reading of 34. This is approximately the same level at which the index stood in June 2009. At the same time is also the second highest reading...

Congress is Broken – Does the Solution Come from Random Numbers?

January 4, 2013 Comments (0)

As the 2012 elections approached, the approval rating of the U.S. Congress was somewhere between 10% and 20%. Yet, despite this, more than 90% of candidates for the U.S. House of Representatives that sought re-election, won. It’s not a secret that this paradoxical incongruity is a problem that threatens the credibility of our system of government. The result is not random, but the solution might be. Every ten years, following the U.S. Census, the maps of districts that our representatives...

Crisis Sentiment Index Worst Since March 2009, Fear at Highest Level Since Survey Began

September 21, 2011 Comments (0)

The Crisis Sentiment Index is a quarterly assessment of the status of the financial crisis by board members, Chief Risk Officers and other C-level executives in companies around the world. The analysis has proven quite prescient in the past. Quick snapshot of this quarter’s results: • The CSI for September 2011 has plunged 14 points to a reading of 23, the lowest reading since March of 2009 • CSI-Fear, the subindex that measures panic among professionals and the public has deteriorated by...

Crisis Sentiment Index Rises Two Points in December

June 25, 2011 Comments (0)

The Crisis Sentiment Index (CSI) is a regular assessment of the status of the financial/economic crisis around the world by senior executives and board members who are involved in risk management. Reported on a scale of 0 to 100, a reading of 75 indicates “normal conditions”. During the past quarter, negative sentiment from emerging and accelerating European sovereign risks was offset by modest improvements in credit availability and a reduction in fear, according to our survey respondents. As...

Evidence that Risk Management Adds Value

June 25, 2011 Comments (0)

Evidence is growing that risk management adds value. Two papers that have recently been shared with me looked very specifically to answer questions about the impact of risk management programs at firms and both have found the answer to be in the affirmative. The first paper looks for evidence of an impact on firm value when Enterprise Risk Management (ERM) programs are in place. They find a positive relation between firm value and the implementation of ERM — roughly a 20% value premium...

Divide and Conquer

June 25, 2011 Comments (0)

In my recent conversations with various board members and senior risk officers, I have become more certain of the need to end the dual and conflicting roles assigned to the newly emerged Chief Risk Officer. It is not reasonable to expect a company to make its most effective use of risk capital when its best resource for such is also expected to act as a watchdog. While such an arrangement helps to deal with the Board/CEO agency problem, it simultaneously under-serves shareholders by diverting...

Books to Help With Understanding the Crisis and to Make Things Better

June 25, 2011 Comments (0)

In past posts I’ve talked about various elements of psychology, behavioral finance and complexity as they can be applied to risk management and our organizations. Risk is the change in value of a system or “thing”. Value can go up or down. A risk event is the event that drives that change in value. Risk management, then, is the process of shaping how the system or “thing” changes in value in response to a risk event, but in a manner more to your liking. Much of the...

Integrated Risk Management – A Spectacular Video

June 25, 2011 Comments (0)

This blog is focused on integration of risk management into the business process. To highlight different ways in which this can happen, I try to find angles that we typically don’t consider as risk managers. This week, I was introduced to an amazing integration of risk management into a “business”. The associated output is visual, realized through a combination of the “CEO’s” creativity and the way in which the company’s risk manager’s work fits...

Survey Results: Is Fair-Value Accounting Exacerbating the Credit Contraction?

June 25, 2011 Comments (0)

This week, the Financial Times asked at the end of their Tuesday opinion piece whether some elements of Basel II that are contributing to pro-cyclicality of the credit cycle and elements of fair-value accounting should temporarily be suspended. Today it was reported that the Financial Services Authority (FSA) in the UK has held ’round table’ meetings with banks and leading auditors to discuss fair value accounting as part of its analysis of valuation techniques in the current market...