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By Pradyumna Javalekar, Executive Director, Market Risk Management, JP Morgan Chase and CO
What impact does volatility and uncertainty have on financial resilience?
Volatility and uncertainty by design are uncontrollable factors for financial market participants. It is critical for market participants to (i) have access to the relevant tools to manage these risks and (ii) dynamically react to market conditions but within a robust governance framework. Active monitoring of the potential impact of volatility and uncertainty to your business using well defined metrics is a key step towards financial resilience. Market Risk managers typically use a combination of techniques (e.g. value-at-risk, scenario analysis) to assess the exposure of the business and the potential outcomes in highly volatile market conditions. Producing this information and then setting a risk appetite around these metrics allows risk managers and the business to limit the potential impact of volatility and uncertainty and puts them in a strong position to react dynamically to changing market conditions.
