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

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  • Sampath, Vijaya

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.

Suggested Citation

  • Sampath, Vijaya, 2009. "The need for greater focus on non-traditional risks: The case of Northern Rock," Journal of Risk Management in Financial Institutions, Henry Stewart Publications, vol. 2(3), pages 301-305, June.
    • Handle: RePEc:aza:rmfi00:y:2009:v:2:i:3:p:301-305
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    More about this item

    Keywords

    reputation; Northern Rock; traditional; risk management; dominant logic;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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