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Framework

Financial Risk Framework™

Protect liquidity, solvency and earnings by governing financial risk with appetite, limits, stress testing and contingency planning.

Overview

Financial risk threatens the balance sheet and earnings through liquidity, credit, market and capital exposures. This framework integrates the financial sub-risks under one governance with limits and stress testing.

Business problem

Financial risks are managed in pockets — treasury here, credit there — with no integrated view of how a shock cascades across liquidity, credit, market and capital.

Purpose

Protect liquidity, solvency and earnings by governing financial risk with appetite, limits, stress testing and contingency planning.

Who it's for
  • CFOs
  • Treasurers
  • Financial institutions
  • Risk committees
Components
  • Liquidity risk
  • Credit risk
  • Market risk
  • Capital & solvency
  • Financial stress testing
  • Contingency funding
Governance Structure
  • CFO/Treasurer own; the Risk Committee oversees; an ALCO (where present) manages financial risk against board-approved limits.
Maturity Levels (shared spine)
L1

Fragile

Maturity level 1 of the shared Outliers risk spine — Fragile.

L2

Functional

Maturity level 2 of the shared Outliers risk spine — Functional.

L3

Disciplined

Maturity level 3 of the shared Outliers risk spine — Disciplined.

L4

Strategic

Maturity level 4 of the shared Outliers risk spine — Strategic.

L5

Resilient

Maturity level 5 of the shared Outliers risk spine — Resilient.

Roadmap
Step 01—
  • Map all financial exposures
Step 02—
  • Set appetite and limits by sub-risk
Step 03—
  • Build stress tests and scenarios
Step 04—
  • Establish a contingency funding plan
Step 05—
  • Monitor and report against limits
Deliverables
  • Financial risk policy suite
  • Limit framework
  • Stress-test pack
  • Financial risk dashboard
Policies & documents
  • Financial risk policy
  • Liquidity & funding policy
  • Credit policy
  • Market risk limit framework
Metrics & KRIs
  • Liquidity runway (days)
  • Credit concentration %
  • FX cover ratio
  • Covenant headroom
Board oversight questions
  • What is our liquidity runway under stress?
  • Where is our largest credit concentration?
  • How exposed are earnings to FX and rate moves?
  • Do we have headroom against covenants and capital thresholds?
Knowledge Graph

Related across the Risk Centre

Assessment

Financial Risk Assessment™

Assess liquidity, credit, market and capital risk.

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Across the ecosystem

Knowledge graph · 2 relations

prioritises (inverse)
IndustryPlaybookInsurance