The Joint Forum, a group of senior financial sector supervisors from the Basel Committee on Banking Supervision, the International Organization of Securities Commissions, and the International Association of Insurance Supervisors (IAIS), has released the final version of its paper titled Cross-Sectoral Review of Group-Wide Identification and Management of Risk Concentrations (paper). The paper assesses the progress financial conglomerates have made in identifying, measuring and managing risk concentrations on a firm-wide basis and across major risks to which these firms are exposed. The paper also includes observations and lessons drawn from the market turmoil that began in mid-2007.

The paper found that risk concentrations at most financial conglomerates are still chiefly identified, measured and managed within separate risk categories and within business lines. However, some financial conglomerates are striving for a more ‘horizontal’ (ie, across risk categories) view of risk concentrations. The paper also made two other broad observations. First, when compared with other risk types, the management of liquidity risk tends does not tend to be as well integrated in a scheme of cross risk analysis. Second, insurance-led conglomerates seem to be more experienced in undertaking the design of integrated cross risk scenario analysis.