Global risk

Global risk
See also

Global risk contains the risks which have a broad-based influence on the world market. Global risk relates to the negative risks, which have a crucial impact on many different countries simultaneously [1]. The Global Economic Forum creates a Global Risk Report. There he distinguishes criteria that may refer to the scale of global risk. They distinguish several situations [2]:

  • Global risk is distinguished by the fact that it affects many different places in the world, affects various industries
  • For a risk to be considered global it should have a high level of risk
  • The next criterion is the amount of economic loss. Global risk causes very high economic losses
  • Global risk management should be undertaken by many stakeholders because it affects many different parties at the same time

An automated global risk management system

An automated global risk management system maintains a database relating risk variables including world events government advisories, and other information sources with potential risk for a financial institution. A rating system is used to assess risk based upon criteria Such as risk advisories, historical data and/or interpretation of world events. The system can generate a risk quotient or other rating based upon a weighted algorithm applied to the criteria, wherein the risk quotient is indicative of risk associated with a transaction or an account. The quotient can be monitored periodically, during a transaction, upon account opening or on demand. Actions commensurate with a risk quotient can be presented to a financial institution to help the institution properly manage risk associated with a particular entity or transaction.

Global risk maps

Global risk maps are standardized databases that supply information about the level of risk to supervisors and the financial market society. These are matrices that track the exposures of banks, non-banking financial institutions and other market institutions in the company. They are very useful, but they do not materialize beyond the narrow and focused efforts made in the field of supervision. It is possible to change the current statistical reporting framework in a way that facilitates the analysis of exposure and increased risk overtime at sector level. Thanks to such changes it will be possible to create the perfect global risk mapsp. These modifications will also allow us to bypass the legal aspects related to sharing and disseminating data in the enterprise. This change would also result in a two-step approach to risk monitoring. This would make global risk analysis more accurate and targeted [3].

New perspectives on global risk

According to Jonathan Wright and Daniella Datskovska thanks to globalization, lean processes, and the geographical concentration of production, among other factors, supply chain and transport networks are more efficient than ever before. This complexity of the process increases global risk. The enterprise must identify possible disruptions and risks. More important is the creation of dynamic systems and processes that respond as quickly and efficiently as possible to constantly changing logistics and transport. The goal in the new global risk management methods is not to anticipate the time and place of risk occurrence, but to prepare well for it and to acquire skills to respond effectively and immediately [4].

References

Footnotes

  1. H Dinçer, S Yüksel, S Senel 2018, p.1
  2. H Dinçer, S Yüksel, S Şenel 2018, p.1
  3. SG Cecchetti, I Fender, P McGuire 2010, p.21
  4. JH WriGHt, D Datskovska 2012, p.1

Author: Karolina Kaleta