ERM Frameworks and Responses to risk [74]

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Bullet points include: Traditional way of restricting risk-taking involves limits Allows decentralised decision-making by providing some safeguards C.f. reintroduction of leverage limit into Basel III Often set rather judgementally and may not be adjusted for risk Suppose organisation has an elaborate set of overlapping limits decided on by multiple layers of decision-makers Limit system might impair performance and might also fail to avoid large losses if limits are not (coherently) applied across all business units – another reason for ERM?

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