Risk and Uncertainties- The concept of Risk is distinct from the concept of Uncertainty. The former relates to that which can be predicted, measured, or quantified whereas the latter relates to “unknown unknowns” and “known unknowables” where outcomes and probability distributions cannot be meaningfully defined.
The risk applies to decision-making conditions under which all possible outcomes and their probability of circumstances are known to the decision-maker, and uncertainty introduces to situations under which each the outcomes and/or their probabilities of events are unknown to the decision-maker.
Risk management in banks has changed substantially over the past ten years. The regulations that emerged from the global financial crisis and the fines that were levied in its wake triggered a wave of change in risk functions. These included more detailed and demanding capital, leverage, liquidity, and funding requirements, as well as higher standards for risk reporting.
Risk transformation is strategic rather than tactical, integrated rather than fragmented, and systematic rather than bolted-on. Anything less will likely waste resources as well as opportunities to position the institution for future growth and competitiveness.
The module includes the following:
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