Enterprise Risk Management at Credit Suisse
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Case Details:
Case Code : ERMT-024
Case Length : 27 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : Credit Suisse
Industry : Banking
Countries : Switzerland
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
Overview of Risks
CS's risk management strategy was driven by three main
objectives - to preserve the Group's capital base, to optimize the allocation of
capital and to foster a proactive risk culture.
CS considered the following risks to be important.
• Market risk - defined as the risk of a potential loss in fair values arising
from adverse changes in market rates and prices...
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Risk Management Governance
CS performed risk management oversight at several levels:
• The Group Board of Directors and Boards of Directors of other legal entities
provided direction, supervision and control for the Group. They set guidelines
for the Group's general risk policy and strategy and regularly reviewed major
risk exposures.
• The Audit Committee monitored the adequacy of the financial reporting process
and systems of internal controls, accounting, risk management, and legal and
regulatory compliance, as well as the independence and performance of the
external and internal auditors... |
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Economic Risk Capital
CS defined Economic Risk Capital ((ERC), as the economic capital needed to
remain in business even under extreme market, business and operational
conditions. CS believed that by providing a common language and terminology for
risk across the Group, ERC had increased risk transparency and promoted know-how
sharing across the Group. The primary merit of ERC lay in its ability to provide
meaningful signals regarding risk trends over time. However, inter-firm,
economic capital comparisons were not meaningful, as there was substantial
variation across institutions in terms of the definition of economic capital,
model coverage, assumptions, data series and implementation specifics...
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Market Risk
Significant risk management responsibilities were assigned to risk management
committees.
The CSFS Asset and Liability Management Committee, was responsible for
supervision and analysis of the balance sheet and considered interest rate
forecasts and the corresponding risk implications.
The CSFS Risk Management Committee supervised and oversaw the development of all
major and relevant risk exposures of the respective risk categories... |
Liquidity and Funding Risk
Liquidity and funding risk was the risk that the bank might not be able to fund
assets or meet obligations at a reasonable price. CS managed its funding
requirements based on business needs, regulatory requirements, rating agency
criteria, tax, capital, liquidity and other considerations. Although CS operated
through separate business units, its liquidity needs had to be satisfied on a
consolidated basis and, in the case of banking units, on both a consolidated and
legal entity basis...
Excerpts Contd...>>
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