Effective risk management requires insight into the main drivers and sources of risk to the enterprise, as well as an understanding of how controls and risk countermeasures will reduce that risk. Through our First-of-a-Kind (FOAK) program, researchers at IBM Research - Zurich are collaborating with a team of researchers around the globe and with a pilot client to incorporate causal analytics for risk and performance into the business intelligence and visualization tools in the IBM Cognos brand. The tools have the ability to discover causal relationships among risk and performance metrics, and allow managers to gain insight into the key determinants of risk. The tools also have a simulation capability for estimating risk and performance in hypothetical, “what-if” scenarios, as well as to perform goal-seek analysis for determining feasible means of achieving high risk-adjusted business performance.
Sample “what-if” analysis: What are my expected credit losses over the next 4 quarters if roll rates, non-performing loans and foreclosure rates change?