In the latest episode of Treasury Live, Dr Edmund Barter, lead data scientists at CheckRisk, discusses 'distance to distress' and how it can be used as a more accurate metric for monitoring investment risk.
The 2008 banking crisis demonstrated how when one bank fails, the impact will be felt far and wide. The collapse of Lehman Brothers led other banks to collapse, showing how contagion can spread quickly.
The crisis provided lessons for us all, heightening awareness among risk and treasury professionals of just how damaging a meltdown elsewhere can be.
Thankfully risk management has come on leaps and bounds in recent years, and technology has played a large part in that. Risk consultancy firm CheckRisk has created BankFox, software that allows users to monitor a bank’s distance to distress to help treasurers measure and assess risks, and how the risk that could build up at one bank might spread to others.
In this podcast, Dr Edmund Barter, lead data scientist at CheckRisk, looks at how the global banking network is connected and how understanding the risks is the system can be paramount.
Using the 2008 banking crisis and the more modern example of the Coronavirus potentially impacting the global economy, Barter demonstrates how risk can spread through entry points – which are often banks that deal with foreign economies that are more prone to upheaval.
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