Welcome to SERRAQ

Who We are

SERRAQ is the world’s leading Risk Accounting professional body. We are a not-for-profit organization, limited by guarantee, that is run by its members for the benefit of its members. SERRAQ combines the attributes of a global professional and standards setting organization with modern data sharing to provide benchmarking and other data services to its members as well as supporting regulatory, governmental and other public disclosure requirements. SERRAQ membership is open to all corporate entities interested in implementing the latest, leading edge approaches to non-financial risk measurement and management, as well as individuals who wish to pursue a career in Risk Accounting.

Our Mission

Our mission is to position Risk Accounting as the universally adopted method of identifying, quantifying, aggregating and reporting all forms of non-financial risks.

Risk Accounting Standards Board (RASB)

SERRAQ HQ hosts a Risk Accounting Standards Board (RASB) comprised of leading academics and practitioners. Its function is to approve Risk Accounting standards for publication, the requirements for the ‘Certified Risk Accountant’ qualification and ethical and professional standards of conduct.

The RASB’s current composition is:

Peter Hughes

Peter is Chairman of the Risk Accounting Standards Board. He is a chartered accountant and a visiting fellow and member of the advisory board of Durham University Business School’s Centre for Banking, Institutions and Development (CBID) research group. He was formerly a banker with JPMorgan Chase where he held senior positions in finance, operations, risk management, treasury & trading and audit.

Dennis Philip

Dennis is a Professor in Finance at the Durham University Business School and Director of its Centre for Banking, Institutions and Development (CBID) research group. He holds a PhD in Finance from Cass Business School. His research contributes to the understanding of the interactions between firm characteristics and financial markets. His research has been funded by financial companies, central banks and recently from the European Commission. He is involved in various policy-led research projects, in particular research in financial literacy and inclusion in emerging markets, with international connectivity in both academia and practice.

Our Structure

SERRAQ’s target operating model comprises a global network of not-for-profit, private legal entities limited by guarantee. Where this legal form is not available a similar alternative will be adopted. The lead entity (SERRAQ HQ) sets operating policies, manages global relationships and contracts and delivers support and administrative services to the global network. Country or regional SERRAQ entities deliver support and administrative services to corporate and individual members.

RegTech Software

SERRAQ commissions and supervises the development of a RegTech software solution – ‘MetRisQ’ – that incorporates approved Risk Accounting standards. MetRisQ also prepares anonymized risk data to enable data sharing with participating members and for approved public disclosure. SERRAQ’s preferred supplier of software development services is Sinoptix SA, a European IT services firm.

Message from the Chairman

Welcome to SERRAQ

It’s almost 20 years ago that I was asked by the Chase Manhattan Bank’s COO, Rick Mangogna, to form and lead a team with a mission to design and implement a risk reporting framework for global operations. We soon understood that achieving our mission depended on the successful definition of a common risk measurement method that could consistently and reliably identify, quantify, aggregate and compare all the diverse exposures to risk present in bank operations.

Risk Accounting

Explanatory Note

Risk managers have adopted a number of terms to describe the risks inherent in the operating environments of financial institutions. The most widely used are ‘operational risk’ and ‘enterprise risk’. More recently, a further term has emerged… ‘non-financial risk’. We believe these three terms are essentially synonymous. Accordingly, SERRAQ has adopted the term ‘non-financial risk’ to mean all the risks inherent in the operating environments of financial institutions, including operational and enterprise risks.

Overview

Risk Accounting is a new and revolutionary method and system that identifies, quantifies, aggregates and reports exposures to non-financial risks.

SERRAQ has defined a new, additive, standard unit of measurement for non-financial risks, unique to the Risk Accounting method, called a Risk Unit or RU.

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SERRAQ Definitions

Exposure to non-financial risks exists where a financial institution fails to adequately plan, organise, manage and control its internal risk-mitigating activities and processes.

In contrast, exposure to financial risks exists where a financial institution intentionally creates external financial exposures with customers, intermediaries…

The Portfolio View

Non-financial risks cannot be effectively managed without first constituting the complete portfolio of controlled and audited non-financial risks.

A ‘Portfolio View’ is the essential foundation for effective risk control, public disclosure, the application of tried and tested portfolio risk management methods (trending, ranking…

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Key Attributes of Risk Accounting

The Risk Mitigation Index (RMI) is a measure of risk culture as it blends qualitative and quantitative risk attributes from across the enterprise into a single metric.

Accordingly, risk governance is focused on planning and implementing strategies aimed at continually improving the RMI.

Monetary Value of an RU

One of SERRAQ’s longer term aims is to calculate the monetary value of an RU (RUm) by modelling non-financial risk loss data correlated with related context information in the form of Residual Risk RUs. Once determined, the RUm can be used to estimate non-financial risk related expected losses (Residual Risk RUs x RUm).

Expected losses calculated in this way can be used to risk-adjust audited financial statements, similar to CECL accounting provisions for credit risk. This creates the possibility to lobby regulators to adopt the RUm in the determination of regulatory capital requirements for non-financial risks providing a high degree of risk sensitivity, simplicity and comparability in capital adequacy calculations.

What Experts Say?

As published in the “Comments on Risk Accounting” by Henry Stewart Publications’ “Journal of Risk Management in Financial Institutions”

[1752-8887 – 2016, Vol. 9, 4 413–420]

“…the first mechanism proposed to integrate the major components of risk in a large institution”

“…represents a sizeable step forward in the search for a practical global solution to enterprise risk management (ERM)”

Julian Williams, PhD

Durham University Business School

“…(the) approach could be a meaningful way of establishing a common metric for operational risk, an area in risk management which, after many years, is still lacking analytical rigour”

Madelyn Antoncic, PhD

Principal Global Investors

Peter Hughes leads research seminar on Risk Accounting at University of Leicester Business School

Peter Hughes was invited to lead a research seminar on Risk Accounting for post-graduate students and faculty of the University of Leicester Business School Peter’s seminar on 31st October 2018 titled ‘A Test of the Feasibility of a Common Metric for Non-Financial...

Research Paper on Risk Accounting Published by the Journal of Risk Management in Financial Institutions

The research paper “A test of the feasibility of a common risk accounting metric for enterprise risks”, authored by Peter Hughes (Visiting Fellow, Durham University Business School) and Professor Julian Williams (Chair in Accounting and Finance, Durham University...

RegTech applied to enterprise risk management (ERM)

Peter Hughes comments on ongoing research, which he is leading at the Durham University Business School, into new methods and systems aimed at identifying, quantifying, aggregating and reporting non-financial enterprise risks and the implications for evolving RegTech...

The UK Banks’ Ring Fencing Legislation – Peter Hughes Expresses Reservations

Peter Hughes is quoted in an FT / Global Risk Regulator report on the UK’s ring-fencing legislation that is designed to make banks’ retail operations safer by organisationally isolating them from their riskier investment banking units. A recent FT / Global Risk...

New GARP Article Showcases New Advances in the Academic Research on Risk Accounting

A new article published by Peter Hughes on Feb. 23rd on the GARP.org website, showcases the advances in the ongoing academic research of the Risk Accounting method, undertaken at the Durham University Business School’s (DUBS) Centre for Banking, Institutions and...

Mr. Peter J. Hughes’ presentation at the “Risks and Opportunities for Large Scale Infrastructures” event on December 7th, 2017 in Măgurele, Romania

At the invitation of the Romanian Institute for Nuclear Physics and Engineering, Mr. Peter J. Hughes presented an overview of the Risk Accounting method at the “Risks and Opportunities for Large Scale Infrastructures” event on December 7th, 2017 in Măgurele, Romania....

Mr. Peter J. Hughes invited to talk at the “Risks and Opportunities for Large Scale Infrastructures” on December 7th, 2017 in Bucharest, Romania

The Chairman of the Risk Accounting Standards Board, Peter Hughes, will give a talk on ‘A Common Metric for Risk’ at a risk management conference organised by the Romanian Institute of Nuclear Physics and Engineering on November 7th, 2017. The event is part of the...

Mr. Peter J. Hughes to give a talk on “The Technology of Risk Accounting” on November 9th, 2017 in Edinburgh

The Chairman of the Risk Accounting Standards Board, Peter Hughes, will be giving a talk titled “The Technology of Risk Accounting” at an event organised by the FinTech and Auditing Network to be held at the Edinburgh University Business School on 9th November 2017....

Dr. Dennis Philip, PhD Recently Joined SERRAQ’s Standards Board

SERRAQ welcomes Dr. Dennis Philip (PhD) who recently joined the Standards Board. Dennis is a Reader in Finance at the Durham University Business School and is the Director of the Centre for Banking, Institutions & Development (CBID). He holds a PhD in Finance from...

Peter Hughes Rewarded for Comments on Risk.Net Article

Risk.Net runs a LinkedIn discussion group on Operational Risk offers prizes for the best comment on the topics discussed. Alex Krohn, one of the Risk.Net magazine’s editors, recently announced Peter Hughes' comment on the Risk.Net article "Nickel-and-Dimon: why bank...

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