Risk: making an issue of control

Citation

(2000), "Risk: making an issue of control", Balance Sheet, Vol. 8 No. 1. https://doi.org/10.1108/bs.2000.26508aaa.001

Risk: making an issue of control

Risk: making an issue of control

This issue takes as its theme the coming worries that are starting to nag away at the banking world. The problem with risk management is that it can seem like a tarpaulin in a gale. Just when you think you have one corner nailed down you notice, out of the corner of your eye, that another looks as though it is about to come flapping free. So we start with the bad news. Our new columnist, the famed Financial Times veteran observer, John Plender, takes a look at what he sees as the banking crisis to come. The enormous structural change taking place in European banking, he argues, is going to cause severe strain both on bankers struggling to keep risk management and internal controls in line and on regulators attempting to bring rigour to their supervision of the sector.

To add to the wary prognosis which Plender puts forward we then have an assessment of the latest research from Deloitte & Touche on how international investment banks see the risk management pitfalls ahead. Over the last year banks have suffered from international turbulence. And they have realised that the risk management techniques they had installed to ward off losses have not been as successful as they had originally hoped. Now, as the survey reveals, banks are turning to new techniques to protect them from the troubles which they think may be just over the horizon.

Modelling business risk is the key process in such markets. And in this issue Andy Winterton of Bank One takes a look at how the skills have developed in recent years and examines how effective they have been. Then he assesses the latest methods and warns against misinterpretations.

The International Federation of Accountants (IFAC), the global body for the accounting profession, was so worried about the state of risk management that it recently commissioned the world's biggest firm, PricewaterhouseCoopers, to produce a report on how banks should be dealing with the disciplines required. Chris Cooper is a global partner with the firm and is based in Sydney, Australia. As one of the authors of the report he has put together an incisive piece looking at what the report discovered and what actions it recommended that banks take in the future. Complete with a case study involving the Royal Bank Financial Group it links the whole process in with the key management objective of our time ­ shareholder value.

One bright spot in the business is the remuneration that skilled professionals can command in a growing market which still finds the right skills in scarce supply. International recruitment consultants, Robert Walters, have compiled an exclusive global survey for us.

For many organisations around the world recent years have seen a wave of enthusiasm for the implementation of control self assessment as a risk management technique. Vicky Kubitscheck of AEGON UK, the holding company for Scottish Equitable, provides a practical guide to implementing just such a system in a financial services organisation.

The rise of the credit derivatives market has been rapid and its significance can sometimes be hard to grasp. Margarita Michail of Monis in New York has provided a quick catch-up guide complete with a prognosis of what the future holds for the market.

Meanwhile Dr Joseph Mariathasan, secretary of the UK Asset & Liability Association (ALMA) and director of product development at Morley Fund Management, takes a look at the use of derivatives by insurance companies and provides a guide to what is best for whom.

One of the problems faced by managers in the risk management market is often how you bring the most senior management on board. Adrian Belton, director of group operational risk with Barclays Bank, has recently been thinking this problem through and he provides a guide to 'getting risk managers to the top table'.

And finally, in Offshore, our feature which takes a sideways glance at the business, David Damant, the veteran analyst and long-term observer of the derivatives scene, provides the scenario for the utopia to come: 'We are in the presence of a revolution so dramatic that the entire financial future of the world will be changed', he suggests. But then, returning to our theme of the risk ahead, he does wonder whether chaos might not be the end result after all.