Risk Insights

Risk management has long been defined by what it stops. Reviews, challenges, and, when warranted, vetoes are the standard tools of the second line of defense, and each one exists to keep a firm from taking on more risk than it wants to hold. In many organizations, risk managers are known as obstructionists, the people who say “no” and “not so fast.” They are the institutional brake pedal that keeps commercial ambition from outrunning prudence.

Amid military and trade conflicts and “growing divisions,” as described by the World Economic Forum, risk managers’ task is to price several overlapping shocks at once, across portfolios whose constituents vary enormously in how they absorb turbulence. One variable in that equation tends to be noticed last: The ownership structure of the firms being financed, insured, rated or underwritten.

Maintaining effective culture, in risk and other management contexts, has long been a concern of regulators and the organizations they supervise. Now the supervisors and their processes are coming under scrutiny.. The 2023 collapse of Silicon Valley Bank (SVB) turned a spotlight on the performance and practices of supervisors and how they relate to the banking system’s safety and soundness.

Every few years, news reports about El Niño appear, along with striking details about its effects on storm systems, society, and nature. In recent weeks and months, news outlets and social media accounts across the globe have reported that a potentially record-breaking El Niño event is underway in the latter half of 2026. While people know that El Niño is “something that happens in the Pacific Ocean,” many lack details on what that “something” is.

Two new futures contracts are poised to begin trading October 5 on the NYMEX market. They “will bring much-needed hedging and investment vehicles to businesses looking to manage compute, the processing power and hardware infrastructure that machines need to train and run AI models.” So said NYMEX parent CME Group when announcing the launch with its partner Silicon Data, whose indexes on Nvidia GPU chip rental costs underlie the contracts.

Within enterprise risk management (ERM) frameworks, legal risk occupies a distinct space. Banks manage market risk and credit risk by trading risk for rewards. Conversely, banks traditionally maintain a near-zero tolerance for legal and compliance risk. The large compliance structures that financial institutions built to ensure adherence to regulations relied on the threat of public enforcement actions, heavy civil money penalties, and reputational damage.

In the closing days of July, public disclosures described artificial-intelligence agents that crossed the boundaries of their evaluations and reached systems belonging to outside organizations. The laboratory conducting the evaluation and the platform it reached each investigated and disclosed. The immediate causes appear to have been failures of configuration and containment. Those facts matter. They are not the largest fact.

Much-anticipated blockchain ecosystems for institutional finance are gradually falling into place. While details and technicalities are still being worked out, William Ralston Saul has a clear vision of an end state.

Within IFRS 9, banks project (mostly) three trajectories of future losses – the pessimistic, base and optimistic scenarios. The discounted values of these loss scenarios are then weighted (by the three scenario weights), so that overall Expected Credit Losses is determined. The scenario losses are based upon the projections of common macroeconomic variables and raw material indices. Banks calculate the future losses for each year on the forecast horizon, for each of the three scenarios.

The performance outlook for prime auto-loan securitizations this year is deteriorating, according to Fitch Ratings presale reports, as borrowers face macroeconomic headwinds, tariff uncertainty and labor market pressures. The portfolios backing the offerings are bifurcating, with some experiencing higher delinquencies and losses in recent vintages of loans, and others showing improvement.