The most comprehensive educational resources for finance

Failure to Monitor and Manage Risk

Based on its communication with the top management and in line with their business objectives, the firms will decide to assume certain risks while mitigate, transfer or ignore the other risks. It’s the job of the risk management to ensure that this happens. To do so, risk managers are required to constantly monitor the risk

Role of Effective Communication in Risk Management

Even though it’s the risk managers who run the risk management department and identify, measure and manage risk, they don’t do it for their own benefit. The risk management department is also not a profit center. The risk managers are just doing their job to maximize shareholder value at the direction of the senior management

How Known Risks can be Mismeasured?

One of the reasons for the failure of risk management is that even though the correct risk metric has been identified, the risk managers mismeasure the risks known to them. This mismeasurement can happen in many ways. The two broad areas that provide scope for mismeasurement are the use of distribution and the use of

Failure to Account for Known and Unknown Risks

One more reason for the failure of risk management is that some of the important risks get ignored. This can take two different forms. Known risks are ignored: In this case the risk manager ignores a known risk. This could be because the manager thinks that it’s not a material (important) risk. It could also

How can Risk Management Fail?

As we discussed in the previous article, risk management performs three they roles, and the failure can happen in performing any of these roles. Identify and evaluate the risks The first step is to identify and measure risk. Typically, risk management will choose certain risk metric to measure and benchmark risk. The choice of risk

Risk Management Failures

In a typical organization, risk management performs three key roles: Identify and evaluate the risks faced by the firm Communicate these risks to the key stakeholders (Senior management, and board) Monitor and manage the firm’s risk as per its objectives. In order to ensure that the risk is monitored appropriately, the firm will decide on

Probability Distribution Function for a Single Variable

One of the most important concepts in Finance is the concept of a random variable. For example this can be viewed as the outcome of throwing a die where the process is fixed by the outcome is not. Form the definition of a random variable is derived the definition of the distribution function which is

Madoff Ponzi Scheme

2139 will be the year Bernie Madoff will be allowed to walk from prison after serving his prison sentence of 150 years, if at all. The proclaimed architect of a Ponzi scheme that runs into an alleged $50 billion, the Madoff case is one that reeks of greed and betrayal. That Bernie Madoff could single

How to Study for FRM Exam?

The Financial Risk Manager (FRM) exam is a globally recognized professional certification for risk professionals. The exam is conducted worldwide by the Global Association of Risk Professionals. Just to give you a brief background on risk certification, as of now there are two global risk certifications: FRM offered by GARP, and PRM by PRMIA. Both

FRM Exam 2011 Details

FRM program is now conducted in a two-level examination format. The exam is administered manually in paper and pencil format. The FRM Exam can be scheduled in various cities around the world. A complete list of the cities is located under the Exam Sites link on the GARP website. FRM Part 1 Exam Information Part