Analyzing Risk for Financial Institutions—Recommendations for ways to Improve/Adapt Current Model to Better Address Emerging Threats

Addressing the external and internal challenges from stricter regulation requirements and emerging threats have necessitated global financial institutions to deploy efficient and innovative risk assessment systems in a cost-effective manner. Morgan Stanley, the client of this Capstone project, is among these financial institutions facing this issue. This project examined Morgan Stanley’s comprehensive risk assessment model and proposed recommendations on ways of improving the current risk assessment model and work streams.

The team used literature review of financial services risk assessment models, interviews from government and industry experts to gauge current understanding of evolving risks and opportunities in the field. The goal was to leverage both quantitative and qualitative analysis to consider new ways of modeling and addressing risk for Morgan Stanley that allow greater institutional capacity and flexibility to identify new and emerging threats. By understanding better its risk profile, Morgan Stanley can develop relevant strategies to allocate resources efficiently to mitigate enterprise level risk exposures identified from products, client and geography by integrating appropriate controls within its business entities.

The recommendations proposed by the team cover the general risk assessment methodology, customer risk, product risk, geographic risk, automation and centralization, data and technology, and staffing and training. Based on the recommendations, the team produced an industry wide white paper report to encourage stakeholder collaboration and knowledge sharing on risk assessments.