Improving Value at Risk

The client was a commodity dealer who was concerned about the risks they were facing in the market. They were using standard risk measures, but they wanted to understand the nature of their risk and improve their approach by adding Value at Risk (VAR). However, the process of implementing VAR seemed daunting and time-consuming, especially with the added complexity of VAR's limitations in stressed conditions.

The client realized that they needed some outside help to make sense of it all and get things done in a timely manner. They turned to Barbican Consulting for a solution.

Barbican Consulting proposed a two-stage process that involved a thorough desktop review of the client's current risk management practices and a subsequent on-site visit to identify any outstanding issues. Through this process, Barbican Consulting was able to provide the risk manager with an independent assessment of their processes and assumptions, identify weaknesses under stressed conditions, and recommend improvements.

The benefits of the process were clear. It provided the client with a robust, fully documented process that was able to measure and report market risk effectively. The process also helped the client explain the concept of VAR to senior management, providing clarity on what VAR can and cannot achieve. Most importantly, it was all undertaken within the client's timeframe, facilitating timely delivery of the project.

In the end, the client was able to achieve their goal of enhancing their risk management practices with VAR, thanks to the expertise and guidance of Barbican Consulting. This success story is a testament to the value of seeking outside help when facing complex challenges and the importance of having a well-documented, robust risk management process in place.