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 Contd...
Overview of Risks Contd...
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Credit Risk
Credit risk was the possibility of loss if a borrower or counterparty failed to
meet its financial obligations. A major portion of CS's credit risk was
concentrated at Corporate & Retail Banking (within CSFS) and Institutional
Securities (within CSFB). Credit risk rose in the context of lending products,
commitments and letters of credit, and counterparty exposure due to derivative,
foreign exchange and other transactions. CS believed effective credit risk
management required a careful consideration of proposed extensions of credit,
the setting of specific limits, diligent ongoing monitoring during the life of
the exposure and a disciplined approach to recognizing credit impairment. |
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Country Risk
Country risk was the risk of a loss due to the inability or unwillingness of a
sovereign to meet contractual obligations or due to the imposition of controls
on capital flows. Bulk of the country risk was assumed by CSFB. Country ratings
and country limits were the two primary instruments used to manage country risk.
Country ratings provided an assessment of the risk of sovereign default and
identified approval authority levels. The independent Credit Risk Management
department, or CRM, of CSFB - in cooperation with the economic research
department and the CRO - periodically updated these rating assessments. Country
limits capped exposure to individual countries...
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Insurance Risk
Protection from unplanned risk accumulations, such as natural catastrophe
exposure, was a key activity of the insurance business. Asset liability
mismatches in insurance companies resulted primarily from premiums being
received earlier than claims were settled. Premiums earned by selling insurance
policies were invested to cover claims occurring at a future date, sometimes
many years later...
Business Risk
Business might not be able to cover their ongoing expenses with ongoing income
due to loss events like major market contractions. Business risk was defined as
the difference between the estimated revenues and the estimated expenses in a
crisis - excluding components captured by the other risk categories... |
Operational Risk
Operational risk was the risk of loss resulting from inadequate or failed
internal processes, people and systems or from external events. CS had
identified five major operational risk categories: organizational,
policy/process, technology, human and external. Periodic, group-wide meetings
were held to promote a common understanding of priorities and to foster a
dialogue between the Corporate Center and the segments...
Exhibits
Exhibit I: Credit Suisse: Key Position Risk Trends
Exhibit II: Credit Suisse: Measurement of Market Risk
Exhibit III: Market Risk in the Credit Suisse Group Trading Portfolios
(99%,1-day VaR)
Exhibit IV: Credit Suisse: Market Risk in Non Trading Portfolios
Exhibit V: Credit Suisse: Business Specific Market Risk Disclosures
Exhibit VI: Credit Suisse: Total Credit Risk Exposure
Exhibit VII: Credit Suisse: Dues from banks
Exhibit VIII: Credit Suisse: Dues from customers and mortgages
Exhibit IX: Credit Suisse: Dues from Customers and Mortgages by Economic Sector
Exhibit X: Credit Suisse: Dues from Customers and Mortgages by Collateral
Amounts
Exhibit XI: Credit Suisse: Dues from Customers and Mortgages by Time Remaining
until Contractual Maturity
Exhibit XII: Credit Suisse: Interest Rate Sensitivity
Exhibit XIII
Exhibit XIV: Credit Suisse: Total Loan Portfolio Exposure and Allowances and
Provisions for Credit Risk
Exhibit XV: Credit Suisse: Non Performing Loan Estimate
Exhibit XVI: Credit Suisse: Restructured and Problem Loans
Exhibit XVII: Credit Suisse: Loan valuation Allowance
Exhibit XVIII: Credit Suisse: Gross Write-offs
Exhibit XIX
Exhibit XX: Credit Suisse: Analysis of Loan Valuation Allowance
Exhibit XXI: Credit Suisse: Analysis of Loan Valuation Allowance
Exhibit XXII: Credit Suisse: Analysis of Loan Valuation Allowance
Exhibit XXIII: Credit Suisse: Cross-border Outstandings
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