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Case study

The need for greater focus on non-traditional risks: The case of Northern Rock

Vijaya Sampath
Journal of Risk Management in Financial Institutions, 2 (3), 301-305 (2009)
https://doi.org/10.69554/OVFE3946

Abstract

This paper highlights the importance of managing and mitigating non-traditional risks such as reputational and strategic risk in the context of enterprise risk management. A case study approach is adopted to illustrate this issue, showing how the UK bank, Northern Rock, which recently suffered a dangerous run, was mired with reputational risk right from its inception, and had a business model that assumed ‘dominant logic” and neglected potential risk elements. The paper argues that, due to the paucity of available data, measurability and knowability, non-traditional risks need immediate and constant attention. Unlike conventional risks, they cannot be modelled to esoteric limits with the help of computers. The combination of ignorance and a poorly structured approach to risk accentuates traditional risks such as market, credit and operational risk and cumulatively worsens the consequences.

Keywords: reputation; Northern Rock; traditional; risk management; dominant logic

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Author's Biography

Vijaya Sampath offers industry-critical consulting for IT solutions in the banking industry in such areas as front-office optimisation, backoffice transformation, as well as risk and compliance. She works closely with IBM’s internal brands and external partners to develop cutting-edge solutions and assets in service-oriented architecture (SOA) space. Prior to joining IBM in 2007, she served the State Bank of India for 22 years, holding key management positions specialising in corporate and retail banking, credit risk management, risk-based internal audit and business process re-engineering. She has an MBA from the University of Leeds (UK) with a major in derivatives. She is a member of The Indian Institute of Bankers, PRMIA, GARP and other professional organisations.

Citation

Sampath, Vijaya (2009, June 1). The need for greater focus on non-traditional risks: The case of Northern Rock. In the Journal of Risk Management in Financial Institutions, Volume 2, Issue 3. https://doi.org/10.69554/OVFE3946.

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cover image, Journal of Risk Management in Financial Institutions
Journal of Risk Management in Financial Institutions
Volume 2 / Issue 3
© Henry Stewart
Publications LLP

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