The need for greater focus on non-traditional risks: The case of Northern Rock

Vijaya Sampath

Journal of Risk Management in Financial Institutions, 2009, vol. 2, issue 3, 301-305

Abstract: This paper highlights the importance of managing and mitigating non-traditional risks such as reputational and strategic risk in the context of enterprise risk management. A case study approach is adopted to illustrate this issue, showing how the UK bank, Northern Rock, which recently suffered a dangerous run, was mired with reputational risk right from its inception, and had a business model that assumed ‘dominant logic” and neglected potential risk elements. The paper argues that, due to the paucity of available data, measurability and knowability, non-traditional risks need immediate and constant attention. Unlike conventional risks, they cannot be modelled to esoteric limits with the help of computers. The combination of ignorance and a poorly structured approach to risk accentuates traditional risks such as market, credit and operational risk and cumulatively worsens the consequences.

Keywords: reputation; Northern Rock; traditional; risk management; dominant logic (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:aza:rmfi00:y:2009:v:2:i:3:p:301-305

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