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Uncovering Risk

The client knew that their business was exposed to low probability but high-cost risks. These risks were present not just in their treasury, but also in other parts of the business like product pricing, volume, and structural balance sheet risks. The company had made improvements to their systems, processes, reporting, and governance over the years, but they wondered if it was enough. Could they confidently tell regulators that they were on top of everything?

The biggest danger for them was "Groupthink" - where hidden issues might go unnoticed and assumptions could go unchallenged. This was a risk that they couldn't afford to take lightly. So they turned to Barbican Consulting for a fresh and independent perspective.

As a regular client, Barbican Consulting knew the business well. But they knew that sometimes, a fresh look was needed to evaluate what was going on. They read all the relevant documents and then visited the client's business to ask the tough questions that needed to be asked. This process led to the identification of eight high-level issues that were subsequently addressed at the Board level.

Three of these issues were particularly noteworthy. The first was basis risk - how flexible was the balance sheet in adjusting margin? The second was hidden risks - how could they report and manage market risk with products that had option-like features? And the third was stress testing - were the interest rate scenarios severe enough on both the upside and downside?

The solutions to these issues weren't readily available. But what mattered most was that the discussion was had, and the outcomes were acted upon. This was exactly what regulators wanted to see, and it was what Barbican Consulting facilitated.

In the end, the client was able to uncover things they may have missed and engage in meaningful Board discussions that led to action. By seeking out a fresh and independent opinion, they were able to address risks that could have caused significant damage down the line. This is why it's essential to keep an open mind and welcome outside perspectives - because you never know what you might uncover.

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