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December 1, 2010
Press Release – ERM Taxonomy Project
Management Seminars
LONDON: Stress Testing & Scenario Analysis for Enterprise & Operational Risk Management
Marcus Evans Conferences
June 14-15, 2012
Calendar of Events
TORONTO: International
Model Risk Management
June 2-4, 2015
Software Products Consulting Services ERM Seminars
The global financial crisis revealed the need for a paradigm shift in risk management practices:  
  • Most economic capital models systematically underestimate risk because they do not adequately incorporate the contribution to risk from the rare "black swan" events – evidenced by the fact that the "one in a hundred year" events occur every 10-15 years.
  • Most risk models rely exclusively on historical data. As a result, they do not accurately reflect the firm's risk profile when the risk profile changes.
    • These models cannot be used to update the risk profile with "soft data" and/or "expert opinion" in an objective, transparent and theoretically valid manner.
  • Biased models create "risk-reward arbitrage" opportunities, allowing unethical managers to deliberately engage in high-risk activities while appearing to operate within stakeholder risk tolerances (principal-agent risk).
  • Because performance is generally benchmarked against peers, irresponsible behavior at one organization can lead to a "follow the herd mentality" and cause an industry trend (i.e., systemic risk).
  • The language of risk management has become too complex for most senior executives to validate the business assumptions underlying their company's risk models.
Consequently, adopting Modern Enterprise Risk Management (ERM) methods has become a strategic imperative for every major corporation and its stakeholders.  
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