Page 145 - Risk Management in current scenario

The macro risk analysis process could be made as a combination of
regular monitoring of macro risks as a part of risk management or
extended to quantification of such risks using multifactor models or
extreme value theory feeding into micro risk analysis which flows into
the capital calculation. This flow of risk analysis would help in identifying
the tail risk better which may not remain a tail risk anymore reducing
the uncertainty.

Currently, regulators have prescribed stress test to get the flavour of tail
risk, however, such stress testing is not regularly performed, no
standardized approach is available and different regulators are doing
different tests where the world is facing common risks.

There is a need for all the regulatory bodies to come together and take
up the exercise of assessing the key global risk and incorporate into the
risk management framework. This will reduce the chances of world facing
another crisis, though it is impossible to remove such happening with
full certainty, but can reachable.

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