Risk and Strategy

Strategy is a combination of the goals for which the firm is striving and the means (policies) by which it is seeking to get there. A strategy is sometimes called a roadmap - which is the path chosen to plow towards the end vision. The most important part of implementing the strategy is ensuring the company is going in the right direction which is towards the end vision.

Alternative Risk Management

Banks and other financial institutions are required to manage various commercial risks that may have an unfavourable impact on their profit, market value and overall success.

Banks and other financial institutions are required to manage various commercial risks that may have an unfavourable impact on their profit, market value and overall success. Relevant institutions may acquire insurance to manage the unfavourable economic impact of particular events occuring from conducting its business, e.g. fire and fraud.

However, there are a number of other business events that may occur that banks and financial institutions are unable to manage the impact of by acquiring insurance, e.g. a credit rating downgrade and a sudden shortage of liquid funds.

Leading credit ratings agencies (CRAs) such as Standard and Poor's and Moody's provide the financial markets with critical information or "intelligence" regarding the performance of banks and financial institutions and, therefore, a favourable credit rating by a CRA is of significant importance to a bank or financial institution.

To assist its clients, Chairmont has developed alternative methods for transferring the risks associated with a credit rating downgrade and liquidity crisis.

Liquidity Risk

This questionnaire assists organisations in the creation or review of their risk management strategy by assisting in the identification of the liquidity risk management strengths and weaknesses.

The questionnaire has been designed to assess whether an applicant satisfies the ASX admission criteria, as set out in ASX Business Rules 2.1A.3(1)(b) and 10.2.1.3(c). The assessment will take into account the responses to this questionnaire, the current and potential size of the organisation, and its current and future business activities.

Market Risk Management

This review assists an organisation to identify market risk strengths and weaknesses by responding to detailed statements on various market aspects.

This questionnaire assists an organisation to review their market risk management strategy. This review assists an organisation to identify market risk strengths and weaknesses by responding to detailed statements on various market aspects. The Questionnaire focuses on risk management framework principles that are necessary to manage, monitor and control the risks inherent in an organisation’s activities.

The questionnaire is comprised of the following sections:

Business Model

Trading Risk Management
Information Technology
Competitors

Structural Path Equation Modelling

Chairmont has an enhanced diagnostic that overcomes the rudimentary weaknesses of traditional statistical methods. This will provide greater understanding of relationships and transmission mechanisms between the independent variables.

The widely used applications of Structural Equation Modelling (SEM) analysis typically focus on observing the simple 1 on 1 relationships between “independent” and “dependent” variables in order to understand cause and effect transmission dynamics. An example in the financial services industry might be the relationship between interest rate increases and home loan arrears; Chairmont has an enhanced diagnostic that overcomes the rudimentary weaknesses of such traditional methods. This modelling approach is referred to as Structural Path Equation Modelling (SPEM) which introduces a third variable type of a "mediating" variable; that sits between dependent and independent variables.

Mediating variables may increase or decrease the impact of an independent variable on a dependent variable, as measured through multiple elasticity metrics. Under a SPEM framework the diagnostic applies behavioural measurement techniques in identifying these mediating variables through the use of psychological based statistical collection methods. In 2010 Chairmont conceptually applied its diagnostic to the Government’s 2008/2009 Stimulus Package which included cash transfers of $12.2bn. The diagnostic was aimed a better understanding the effectiveness of the cash transfers through the relationships and transmission mechanisms between the independent variables (who got what - amount by recipient type) and the dependent variables (impact on economy - GDP, Retail Sales, Unemployment). Chairmont addressed this through the identification of the mediating variables, i.e. the behavioural patterns of the stimulus recipients, and the associated economic flow-on effects from those behaviours to the dependent variables.

Click on the links below to view how this has been applied to the Federal Government's stimulus package.

Part 1: Macroeconomics and the Household Stimulus
Part 2: Behavioural Modelling of the Household Stimulus
Part 3: Statistical Analysis Considerations

Touchpoint Pattern Analysis Diagnostics

Chairmont has developed a Touch Point Pattern Analysis diagnostic within a Big Data world aimed at improving the effectiveness and efficiency of businesses and governments.

Read more on our Touchpoint Pattern Analysis Diagnostic

“Big Data” refers to the increasing volume and detail of information captured by enterprises and through the rise of multimedia and social media that will drive the accelerating growth in data going forward. Chairmont has developed a Touch Point Pattern Analysis diagnostic within a Big Data world aimed at improving the effectiveness and efficiency of businesses and governments. This diagnostic has been conceptually applied to the effectiveness of social security and welfare expenditure.

Governments often allude to measurement deficiencies in respect of their “value for money” principle in respect of inputs and outputs versus desired outcomes. These deficiencies are in respect of the lack of evidence of a clear relationship between expenditures and outcomes. Chairmont’s Pattern Analysis tool leverages our SPEM diagnostic (refer separate case study) as applied to the welfare system.

Transtheoretical Model of Change

The Transtheoretical Model of behavioural change or TTM suggests that a person’s ‘readiness to change’ can explain when and why people change.

The Transtheoretical Model of behavioural change or TTM suggests that a person’s ‘readiness to change’ can explain when and why people change. Behavioural frameworks provide a way of understanding why people might engage in behaviour A rather than B, and enable psychologists to predict how people will behave under different conditions in different environments. An example in the retail industry might be in respect of customers’ purchasing responses to new product alternatives. The TTM posits a staged model of readiness, from ‘no readiness to change’ (Precontemplation) to maintaining changed behaviour (Maintenance).

TTM suggests that people go through five stages of change from being unaware that they are engaging in ‘high-risk’ behaviour to maintaining healthy and sustainable changed behaviour. Further, the way that people interpret events and communication from others can differ depends on the person’s readiness to change. Chairmont applied a TTM approach in respect of a financial institution wanting to better understand the drivers of its customers’ behaviours in respect to a savings product.