United States-Mexico-Canada Agreement

Canadian financial service professionals have watched negotiations with a keen eye to see what changes could be made to the original NAFTA provisions and what the possible implications might be for the industry. With an agreement in place, it is possible to begin to evaluate the new elements of the USMCA and point to the kinds of first and second-order effects of which financial risk managers should be aware.

Managing the Risk of Web Security

Managing the Risk of Web Security Author: Henry Harrison, Co-founder & CTO of Garrison Technology Managing the risk of web security The author is an independent contributor to the Global Risk Institute and is solely responsible for the content of the article. UNDERSTANDING THE RISK FROM THE WEB When you click on a link, you invite… View Article

The Risk to Client’s Financial Data

It has been said that data is the new oil, and if that is the case, your clients could be sitting on a significant unclaimed reservoir. Helping clients claim their rightful ownership of data assets could enable them to both harvest value and enhance their cyber security.

A FINANCIAL INNOVATION SERIES – Smart Contracts

In this paper we discuss smart contracts – computer programmes running on top of a blockchain. We start with some intuitive examples that demonstrate the concept of a smart contract and then consider the Ethereum platform, the most notable platform for decentralized applications. We also outline some applications of smart contracts and discuss associated risks.

Digital Technology: Promise or Peril?

The trend of increasing Cyber Dependency has been highlighted by the World Economic Forum as one of the most impactful trends changing society today. Organizations must be able to view digital innovations and their dependency on them in a systematic way to truly visualise that which is a threat and that which may signal opportunity.

Extracting Value from Stress Testing

This paper explores how firms can benefit by exploring stress testing to examine a wide array of issues. Additionally, Mr. Talwar and Mr. Turnbull explore the value of stress testing to senior executives, board members and probably most particularly to the Risk Management Committee. The authors conclude with the Top 10 Questions Board members should consider when reviewing stress scenarios with Senior Managements.

Diversification risks of Canadian hedge fund strategies

Which Canadian hedge fund strategies minimizes downside risk during traditional market declines? Which strategies are most correlated with traditional broad market indices and to other strategies? These are typical questions that form the basis of any due diligence process of hedge funds and which this article addresses. We examine the potential diversification risks to the selection of hedge fund strategies.

Will AI take over active fund management?

Research in the field of Artificial Intelligence (AI) is growing exponentially, and as a result, applications of the technology in different industries are constantly being discovered. This paper explores how AI can be applied to the field of fund management, and specifically, how it can be used to manage active funds.

GRAFT: Cyber Risk Correlations in the GRAFT Framework

This article is the first in a series that will focus on applying risk correlations to further a robust approach to the management of emerging risks. It applies the correlation matrix from the Global Risks and Trends Framework (GRAFT) to a specific topic in order to highlight risk interdependencies, and to assist in the analysis of strategic implications.

A FINANCIAL INNOVATION SERIES – Risks and Rewards of Financial Innovation

This report will consider several vantage points including that of the incumbent financial institution, the consumer, and the financial system as a whole. We will also offer some insight with regards to potential risk-mitigation strategies and commentary on the potential for fintech-related risks to become systemic.

Systemic Cyber Preparedness

Cyber intrusion and cyber resilience are topics receiving tremendous attention, discussion and action currently and for good reason. Financial firms fend off millions of cyber threats daily. This paper frames the learnings from the most recent efforts to combat global, systemic risk – the 2008 Global Financial Crisis.

Risk Governance: Evolution in Best Practices for Boards

The role of the board has expanded and expectations for performance have increased. This report we emphasize that the most important role of the board is risk governance, and we provide insight to how directors can more effectively oversee risk taking activities.

What Makes a Good Risk Manager?

ARTICLE – The focus today is to develop risk managers so that they can acquire a breadth of experience across multiple risk disciplines. Traditional risk capabilities such as credit and market risk are still necessary; however, these skills are no longer sufficient on their own.

2017-2018 Risk Outlook Survey Results

This year marks 2nd years GRI has conducted their Risk Outlook Survey to assess the risk outlook of our member organizations for the coming year. The results of this survey provide insights into our members’ views on key risks, the stability of the Canadian financial system, and the strength of major global economies.

A New NPH Initiative from Global Risk Institute

At the 2017 Annual Summit, the Global Risk Institute (GRI) announced the creation of a National Pension Hub (NPH) that will serve as Canada’s centre for pension thought leadership and research.

The Challenges of Implementing IFRS 9 – Part 2

At the GRI we expect the transition to IFRS 9 to present challenges to the various stakeholders. There is a clear need for education and discussion across the financial services industry as we approach the implementation date this November. In this paper we focus on the implications of IFRS 9 going forward, particularly as Canadian banks are required to “go live” in November.

President Trump’s Paris Pullout: What it means for financial institutions

Throughout his campaign for the U.S. presidency, Donald Trump expressed skepticism about climate change and promised to repeal Obama-era climate policies. On June 1, 2017, President Trump made good on one of his biggest climate-policy promises by announcing that the United States would withdraw from the Paris Agreement. This paper discusses the impacts of this decision.

Mind the Gap: Addressing Gender Imbalances in Leadership (and a Case for Paternity Leave)

This paper includes an examination of the risks associated with continuation of the workplace gender gap, and the rewards for firms that achieve gender diversity. It makes a case for dedicating a portion of parental leave exclusively for men, on the basis that gender equality at home is a prerequisite for gender equality at work. Other recommended actions to foster gender equality are also included.

Cyber Risk & Security

On April 11th, Duo Security and the Global Risk Institute (GRI) co-hosted an executive breakfast in Toronto to provide an update on current security trends and key information that leaders need to know.

CAT Bond – Premium Spreads

The cost of natural disasters is a major risk for insurers. Recent examples of major catastrophic events, and the associated losses, include Hurricane Katrina ($84 billion), the 2008 Sichuan earthquake ($148 billion), the 2011 Tohoku earthquake and tsunami in Japan (more than $300 billion) and Hurricane Sandy ($75 billion).

Breaking Bad Data & Solving for AML

With this article we are kicking off a focus on the usage of Big Data and Advanced Analytics in the area of anti-moneylaundering (AML). AML has been a particularly difficult solution for global banks as the evolving regulatory standards call for banks to be able to readily monitor all transactions across the firm, which requires an in-depth knowledge of their clients and their clients’ counterparties (and often times the correspondent banks).

Shadow Banking: Non-bank Credit Intermediation Heightens Risks for the Global Financial System

As the shadow banking sector continues to grow, what are the impacts on the overall financial system? How are global financial markets affected by shadow banks and what are the areas to watch? Sheila Judd, Executive in Residence at Global Risk Institute discusses these ideas in this paper on Shadow Banking.

The Challenges of Implementing IFRS 9-Impairment

Canadian Banks and credit unions are in the midst of implementing one of the most challenging accounting changes in recent memory, when they move from an Incurred Loss (IAS 39) to an Expected Credit Loss (“ECL”) (IFRS 9) accounting standard. This article provides an overview of IFRS 9 and its potential impacts.

Equity Holding Preferences of U.S. based Insurance Companies in Low Interest Rate Periods

Equity Holding Preferences of U.S. based Insurance Companies in Low Interest Rate Periods Related Project: Optimal and Actual Asset Allocation Decisions in Protracted Low Interest Rate Periods Author: C. Krishnamurti, N. Papagiorgiou, F. Radmehr Professor Chandrasekhar Krishnamurti is the lead research contributor for the Global Risk Institute on Optimal and Actual Asset Allocation Decisions in Protracted… View Article

AI Frontiers: Where We are Today and the Risks and Benefits of An AI Enabled Future

“Artificial Intelligence” is a very powerful narrative. In fact, today, many leading thinkers envision a future where machines surpass humans in intelligence. In Part One of our two part series, we assess of the potential near term risks and benefits of Artificial Intelligence. Later, in Part Two, we explore how AI is expected to impact Financial Services and what specific use-cases we expect to see over the next 1-3 years.

An Improved Application of the Variable Annuity

Variable annuities have been used as a payout mechanism in some US pension plans that are qualified under the U.S. Internal Revenue Code for many years. This innovative payout technique has also been introduced in a large pension plan in British Columbia that is registered under the Canadian Income Tax Act. Under this technique, the registered pension pl an establishes a “hurdle rate”.

How Natural Language Processing is Reshaping the World of Finance

Natural Language Processing is a sub-section of the artificial intelligence domain that is focused on teaching computers to understand natural human languages. NLP encompasses a range of theory-motivated computational techniques which attempt to address the disconnect between human and computer languages.

A Methodology for Quantum Risk Assessment

Quantum computing is a growing technology that is rapidly changing how electronic communications and digital transactions will take place in the near future. In this article, we look at how organizations can investigate and mitigate the risks associated with the changes that will be brought about by this emerging technology.

Summary of Key Risks in 2017

Initial Perspectives on 2017 – This view is consistent with the consensus of our members, who participated in our key risk survey. Not surprisingly members identified Consumer Debt / Canadian Housing Market, Rising Interest Rates and Cyber Risk amongst their top concerns for 2017.

Market Liquidity: One door closes, another one opens?

Market liquidity is in a transition and the capital markets are undergoing a significant transformation. Like any transition, this one too has its share of challenges and yet, provides many opportunities to participants.

A Target GDP Approach to Risk and Return in Climate Change Policy

Climate change is widely recognized as a serious risk that requires worldwide governmental action. Failing to act on climate change including the risk to the world’s financial systems by threatening financial resilience and longer-term prosperity.

Digital Banking Manifesto: The End of Banks?

Thanks to new developments in data technology and in mobile telecommunications adoption, we see the potential rise of a third wave of innovation in banking. In this paper we will outline the key features, benefits, and strategic imperative of the Digital Bank of the Future

Low rate ever higher debt

The explosion of debt levels world-wide, fueled by extremely low interest rates, may be the biggest and most immediate risk facing the financial sector.

Quantum Computing – An introduction

Computing capacity continues to expand and transform the world we live in. With computing capacity doubling every two years, as we cram more transistors onto microprocessors. And what is the result?

Quantum Computing and Cyber-security

Emerging quantum computing technologies threaten to undermine even the most sophisticated cybersecurity systems installed by businesses and governments

Defined Benefit Plans Are Disappearing

Are variables the answer? In an effort to de-risk, many private companies and public institutions are moving to defined contribution (DC) plans.

Variable Annuities: Fees too high or too low?

To illustrate the basic idea of how a Variable Annuity can mitigate this risk, we examine a very simple product: a Guaranteed Minimum Withdrawal Benefit (GMWB).

Not too big to fail!

The 2008 financial crisis resulted in bank failures, tax payer funded bail outs and new regulations. “Never again” say bank regulators and politicians.

Construction of Mortality Indexes

The Do’s and don’ts – What Makes a Good Mortality Index? With appropriate mortality indexes, one can construct standardized mortality-linked securities.

Say Hello To “Basel IV”

Regulatory rules governing banks – “Basel IV” risks undermining investment made in risk management human capital & technology, as well as perversely incenting banks to hold higher-risk assets

Enterprise Risk Management: How do we govern it?

A collection of essays by leading risk management practitioners key risk governance-related themes, such as governance structures, risk culture, risk policies, risk/strategy alignment, risk capacity, risk appetite, and risk identification and measurement.