RSM432H1 Lecture Notes - Lecture 11: Enterprise Risk Management, Financial Innovation, Distributed Ledger
Document Summary
Enterprise risk management is a process designed to identify potential events that may affect the entity and manage risk to provide reasonable assurance regarding the achievement of entity objectives. Regulators require financial institutions to develop risk appetite frameworks. How much loss at what confidence level is bank prepared to risk. What reputation risk bank is willing to take. What credit rating risk bank is willing to take. How concentrated should risks be: top of the house risk appetite must be allocated across divisions according. Sunk cost bias: bayes theorem, recent information given too much weight, too much reliance on previous experience. Unsupervised: rules map inputs to outputs, find structures and patterns in data, neural networks attempt to mimic ways humans recognize patterns. Reinforcement learning: interact with dynamic environment and perform defined goals, blockchain, payment systems. Controls by community of users on updating information. Rsm432 page 1: convenience, security, simplicity, cost.
