Written Risk Methodology refers to a formalized, documented set of procedures, analytical models, and underlying assumptions employed by an organization to systematically identify, measure, monitor, and report various types of financial and operational risks. This serves as a foundational component of a robust enterprise risk management framework.
Mechanism
This methodology typically specifies quantitative models for precise risk measurement, such as Value at Risk (VaR) or comprehensive stress testing scenarios, alongside qualitative assessment criteria, validated data sources, and clearly defined roles and responsibilities for personnel involved in risk oversight. It provides a consistent basis for risk reporting and informed decision-making.
Methodology
Developing a written risk methodology involves a structured process of risk identification, quantification, and policy definition. This strategic approach ensures transparency, reproducibility, and strict regulatory adherence across all business units. It enables consistent application of risk controls throughout the organization, which is particularly critical for new asset classes like cryptocurrencies, where risk profiles can differ significantly from traditional financial instruments.
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