WEBVTT 1 00:00:04.200 --> 00:00:09.200 We basically see three trends, three issues arising. 2 00:00:09.360 --> 00:00:14.160 The first one is to deal with all the regulatory issues 3 00:00:14.160 --> 00:00:18.180 which means that you need to prioritize what is coming up, 4 00:00:18.180 --> 00:00:19.740 what it means for your institution 5 00:00:19.740 --> 00:00:21.660 and how do you deal with that. 6 00:00:21.660 --> 00:00:23.250 The second one, 7 00:00:23.250 --> 00:00:25.080 they are approaching in a different way, 8 00:00:25.080 --> 00:00:27.900 the technical model development 9 00:00:27.900 --> 00:00:30.480 basically adapting their models 10 00:00:30.480 --> 00:00:33.750 not only to effectively manage risk grade assets 11 00:00:33.750 --> 00:00:38.190 but also to take a more forward looking approach. 12 00:00:38.190 --> 00:00:39.780 And the third issue we see 13 00:00:39.780 --> 00:00:43.380 is having a clear focus on cost management. 14 00:00:43.380 --> 00:00:45.240 So what are the benefits actually 15 00:00:45.240 --> 00:00:48.510 of my risk organization and the risk management 16 00:00:48.510 --> 00:00:49.920 and the people involved there 17 00:00:49.920 --> 00:00:51.930 and how much cost can I justify 18 00:00:51.930 --> 00:00:54.930 to actually do these things in an effective way? 19 00:00:54.930 --> 00:00:58.410 I think one of the main lessons 20 00:00:58.410 --> 00:01:03.410 from the financial crisis within banks is that, 21 00:01:03.750 --> 00:01:07.780 you actually can have a great risk measurement 22 00:01:09.210 --> 00:01:11.733 but still you don't use it for risk management. 23 00:01:12.630 --> 00:01:14.610 And with risk measurement, 24 00:01:14.610 --> 00:01:17.100 we mean that usually the models 25 00:01:17.100 --> 00:01:18.060 that have been built 26 00:01:18.060 --> 00:01:19.863 on the Basel II, Basel III, 27 00:01:20.820 --> 00:01:24.690 but also under economic capital approaches 28 00:01:24.690 --> 00:01:28.320 usually rely obviously on historic data 29 00:01:28.320 --> 00:01:31.170 and historic correlations. 30 00:01:31.170 --> 00:01:35.670 This is good as long as you do not have a big shift 31 00:01:35.670 --> 00:01:38.670 in the industry or in the environment. 32 00:01:38.670 --> 00:01:40.440 If you do have such big shifts, 33 00:01:40.440 --> 00:01:42.540 then these models simply do not work. 34 00:01:42.540 --> 00:01:45.300 That means that you need to incorporate 35 00:01:45.300 --> 00:01:48.690 a forward-looking approach into your modeling. 36 00:01:48.690 --> 00:01:50.370 If you cannot do so, 37 00:01:50.370 --> 00:01:53.040 then you have to be very aware of the limits 38 00:01:53.040 --> 00:01:54.870 the backward-looking models have 39 00:01:54.870 --> 00:01:58.200 and how do you address that limits regularly 40 00:01:58.200 --> 00:02:01.230 in discussions in management meetings 41 00:02:01.230 --> 00:02:03.030 to actually manage then the risk 42 00:02:03.030 --> 00:02:06.090 you see going forward and not only measuring 43 00:02:06.090 --> 00:02:08.370 what has already happened to you. 44 00:02:08.370 --> 00:02:13.370 BCG can add a lot of value inclined work 45 00:02:13.980 --> 00:02:16.920 by taking a very comprehensive approach, 46 00:02:16.920 --> 00:02:19.440 meaning that we look at things 47 00:02:19.440 --> 00:02:21.030 from a risk management perspective 48 00:02:21.030 --> 00:02:23.850 from a regulatory perspective 49 00:02:23.850 --> 00:02:28.080 and also from a general management perspective. 50 00:02:28.080 --> 00:02:31.560 And of course we would have not done so 51 00:02:31.560 --> 00:02:32.580 a couple of years ago, 52 00:02:32.580 --> 00:02:35.403 but given the challenges I just described. 53 00:02:36.570 --> 00:02:38.340 I think there's a huge opportunity 54 00:02:38.340 --> 00:02:41.880 to add to the strategic angle 55 00:02:41.880 --> 00:02:45.870 we usually have, the technical and the compliance angle 56 00:02:45.870 --> 00:02:50.583 and try to make sense of it all in a combined way.