The Risk Accounting method is a revolutionary new approach to quantitative risk measurement and a solution to the latest in regulatory requirements for the banking sector. It has been initially developed within JP Morgan Chase and further perfected and tested within academic environment in UK based universities.
Many industry specialists appreciated the Risk Accounting Method as having a huge potential in bringing the long expected transformation in the banking industry, changes called for by the public and regulators alike. Simplicity, comparability, transparency are only few of the benefits that Risk Accounting can contribute to the industry, having also a great potential for standardization and thus contributing to stabilizing and simplifying the industry’s heterogeneous risk assessment practices.
Risk Accounting is based on principles similar to financial accounting that allow for the identification and quantification of risk parameters within bank’s operations. Such parameters can be recorded at each transaction level, thus providing the granularity required for aggregation by various relevant dimensions in the management or regulatory reporting.
The inertia specific to the banking industry is the main factor affecting the mass adoption of Risk Accounting as a risk measurement approach. A gridlock situation developed within the banking industry where regulators expect banks to propose new approaches to managing risk more effectively, banks are expecting regulators to be more specific in their requirements and technology providers are expecting the industry to ask them for specific solutions. With none of the parties willing to make the first step, the industry became stuck in a situation where everybody expects others to make the first move.
Well, this gridlock situation is about to come to an end, as a Romanian software company – Sinoptix SA, decided to get involved and implement the Risk Accounting method in the world’s first software application called TRisQ®. TRisQ® is currently a functional software tool prototype able to help organizations test the applicability of Risk Accounting and implement it as part of their risk management practices.
As TRisQ® is not yet a packaged, mature product, we welcome the interest of financial services organizations in testing the Risk Accounting method with the help of this tool. Pursuant to a series of articles (“Welcome to Risk Accounting” and “Risk Accounting and Economic Profit”) published in the CFO Magazine by Mr. Peter Hughes, the author and pioneer of the Risk Accounting method, incredible interest was expressed from representatives of other industries such as insurance, pharma or oil & gas. This shows that risk exposure becomes more and more a business component which can no longer be subject to guess work or inadequate approaches as long as its unwanted consequences have negatively affected today’s economy.
The TRisQ® software prototype will be made available for free to any organization willing to test the Risk Accounting method within its own environment. The related consulting work will also be delivered at cost level, only covering the expenses of the consultants involved. Projects are not expected to last longer than 5 to 10 working days per analyzing the simplest business components. For inquiries please call +4 0722 301496 or send us an email at firstname.lastname@example.org.
About FIG Performance Consulting
FIG Performance Consulting was set up in 2001 as a business consulting boutique, sspecialized in private equity investments. In time it evolved into a multi-skilled team with deep understanding of various businesses and industries.
With a wide range of capabilities and relationships FIG Performance Consulting can help both foreign companies looking to do business in Romania or the region, as well Romanian companies looking to improve their business performance.