Have Your Cake and Eat It

Ariane Chapelle

Management reporting is challenging. Risk reporting is worse. In these matters, the balance between too much and too little is hard to find. Too much, and risk committee documents approach 200 pages that no-one will read. Too little, and information gets summarised so much that it becomes meaningless. In both cases, important insights are hidden either in the mass of documents, or in aggregated ratings. It’s useless at best, and dangerous at worst.

One of the challenges of risk reporting is the filtering of risk information to the upper levels of a firm. Departments, business units and group management do not need the same type, or the same amount, of risk information.

Reporting information from one decision level to the next implies choosing what to escalate and what to aggregate. Some key information deserves to be communicated to the next decision level without alteration, when the rest could be summarised in aggregated statements. It requires the selection of what matters: exceptions, high risks, or worrisome alerts, versus what is homogenous enough and uneventful enough to be grouped into synthetic items.

Choices matter: too much escalation will leave decision-makers