Using a Common Risk Accounting Metric for Expressing Enterprise Risk Accumulations
The research paper “A test of the feasibility of a common risk accounting metric for enterprise risks”, authored by Peter Hughes (Visiting Fellow, Durham University Business School) and Professor Julian Williams (Chair in Accounting and Finance, Durham University Business School), was recently published in the Journal of Risk Management in Financial Institutions.
The paper describes how researchers used the Risk Accounting method to convert US banks’ accounting (US GAAP) data into risk data in the form of RUs. Correlations between risk data in RUs and unexpected losses were then examined to conclude whether the RUs presented greater predictive properties than accounting (US GAAP) data. In other words, could risk reporting in RUs have prevented the global financial crisis of 2007/8.
Peter J. Hughes
Chairman of the Risk Accounting Standards Board
Apart from his role in the RASB, Peter is a Visiting Fellow in the Centre for Banking, Institutions and Development (CBID) where he is leading research into risk based accounting systems.
He is a former banker with JPMorgan Chase and Abbey National (now Santander UK) and a fellow of the Institute of Chartered Accountants in England & Wales.