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Board Review

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Published: 5th April 2017 by William Webster

A fresh and independent opinion can uncover things you may have missed. That’s received wisdom. Done properly it provides the catalyst for meaningful Board discussion.

The Background

This client recognised that treasury is risky. Furthermore, similar risks permeated the business. These included product pricing, volume and structural balance sheet risks. Over the years systems, processes, reporting and governance had all improved. But was it sufficient?

The Risk

For want of a better word, the danger is, “Groupthink”. Are there hidden issues? Is something overlooked? Do our assumptions stand up? How do you demonstrate this?

This was Barbican Consulting’s solution

The Proposal

As a regular client, we know the business. But over time things change and we need a fresh look to evaluate what’s going on. This means reading the relevant documents and then visiting. That gives the opportunity to ask the questions that then need fleshing out before a Board report.

The outcome

Eight high level issues were identified and subsequently addressed at Board level. Here are three.

Basis risk in the widest sense of its meaning. Where is the flexibility in the balance sheet to adjust margin?

Hidden risks. How do you report and manage market risk with products that have convexity (option like features)?

Stress testing. Do the interest rate scenarios provide sufficient severity on the upside and downside?

You will see that these issues don’t have ready-made answers. That’s not unusual. The important thing is to have the discussion and act on the outcome. That’s what regulators want to know about and that’s what we facilitate.

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