I.S.R.P.®

The PAMIR key point — The I.S.R.P.®— Incremental of Systemic Risk Points (alternatives to the approach by way of the VaR)

Finding that the traditional risk management methodologies rely on statistical quantification principles that are limited to certain underlying assets found on markets regarded as "liquid". RISKALIS CONSULTING started looking - within the framework of its PAMIR® methodology - for an innovative concept to assess risks in the banking and financial sectors.

The I.S.R.P.® objectives :

  • To provide a composite measurement of the risks incurred by the institutions in the light of their internal systems’ construction and external systemic exchanges,
  • To offer quantification of the “worst case scenarios” by applying the logical risk sequences based on the chain reaction principle.

This measurement can be used to determine “other” risks defined in connection with the Basel II Pillar 2, and will be used as a basic market communication element as defined in Pillar 3.

Basic postulate : The occurrence of an incident in connection with an underlying asset can cause, due to contagion, the occurrence of another incident in a correlated underlying asset.

I.S.R.P ® Particularities:

1/ It takes into account the interactions between the various types of risks (chain reactions, contagion effect).

2/ It takes into account external exchanges (economic, regulatory, legal environments).

3/ It integrates the same denominator for all kinds of risks: operational, rate-related, exchange, credit ...

Following such a concept, one designs its lines of defense (different angles to cover), multi-form composites taking into account interrelationships among assets. This should allow us to anticipate a globalize coverage and a greater efficiency.

4/ It harmonizes the quantitative and qualitative aspects.

5/ It calculates the I.S.R.P through experience feedback (relying on the RISKALIS CONSULTING Knowledge base).

6/ It takes into account the constantly changing market conditions and structural modification as well as the dynamic approach.

7/ It fits naturally into a framework that relies on management by economic capital.