Analysing industry approaches to firm risk appetite and governance

Analysing industry approaches to firm risk appetite and governance

By Dimitrios Papathanasiou, Head of EMEA Treasury and Liquidity Risk, Credit Suisse.

Dimitrios, can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

I am working 2 years in Credit Suisee as Head of EMEA liquidity and Treasury Market risk. My responsibility is to ensure that the bank maintains a prudent profile on liquidity and Treasury Market risk. Before that for 6.5 years I was the head of Group treasury’s Front office desk in the second biggest bottler of Coca Cola where I was responsible for designing and implementing the hedging strategy for FX, rates and commodities. Before that I held various roles in the financial sector from a Treasury auditor to a portfolio manager.

At the Liquidity Risk Management Forum, you will be sharing your insight on industry approaches to firm risk appetite and governance. Why do you believe this is a key talking point in the industry right now and what can risk professionals gain from this insight?

It is just 4-5 years that the banks are increasing the headcount in the liquidity risk area. This looks relatively recent if you compare with other risk areas such as market or credit risk. Credit Suisse is one of the pioneers in the industry on setting up a fairly large second line of defence on liquidity. Our experiences can provide insight to other banks that are setting up their functions now. Appropriate governance and limits are very important factor for successful risk management.

Can you explain some of the challenges of articulating liquidity risk appetite effectively?

One of the main challenges is to maintain a fine balance between risk and return. As a risk manager you want to have a framework that covers all the risks but on the other hand it is important to leave room for the business to operate without imposing unnecessary costs. Defining a holistic framework for liquidity that includes different types of risk such as concentration or FX liquidity risk is also a challenge.

What are the key considerations when managing internal training and understanding?

To customize the training to the audience so that they better understand your material. Another important aspect is to explain how the various trading desks affect the liquidity with their transactions and how to create less risks and costs by being more efficient.

 How would you recommend financial institutions best carry out firm specific stress testing to set minimum survival horizon?

It is a rather complicated subject but at a high level the key is to understand the bank’s business model. The risk manager should be able to understand where the biggest vulnerabilities are and focus on preparing scenarios to assess how the bank’s liquidity profile would change. Understanding the market and how the bank is viewed by the investors and counterparties is also very important.

What, in your opinion does the future hold for liquidity risk professionals, and how can they keep up with the increasing change?

I think in the short run FX liquidity, intercompany, understanding the detailed risk profile within a horizon, Funds Transfer Pricing, Cash Capital models and Business level limits. In the longer term it will be more dynamic limit management to adapt to markets, optimization of liquidity and technology innovation to reduce liquidity risks.

Want to know more? 

The Center for Financial professionals will address several of these key areas and more at the upcoming 7th Annual Liquidity Risk Management Forum taking place on 12 June in London. The forum will provide an exclusive platform for the industries finest to discuss the current liquidity risk landscape including regulatory requirements, markets trends and more. The event will include vital insight from leading CROs, Heads, Managing Directors and regulating bodies such as the European Central Bank. To view the full speaker line up, agenda and more please visit www.cefpro.com/liquidity.

Additionally for more information on registration please call +44 (0) 207 164 6582 or email us at marketing@cefpro.com.