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.
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More From: Journal of Risk Management in Financial Institutions
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