Difference between revisions of "Cost Risk"
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== Definition == | == Definition == | ||
| − | '''Cost Risk''' is the risk that product origination costs | + | '''Cost Risk''' is the risk that product origination costs for achieving a planned amount of business will materially deviate from the expected amounts due to external or internal factors. |
== Causes == | == Causes == | ||
Cost risk can be both due to both internal and external factors: | Cost risk can be both due to both internal and external factors: | ||
| − | * Internal factors include the ability to control [[Remuneration Framework | variable costs]] without demotivating or losing staff | + | * External factors comprise primarily of the market and competitive landscape |
| − | + | * Internal factors include the ability to control [[Remuneration Framework | variable costs]] without demotivating or losing staff. The cost metric will be primarily referencing variable staff costs but possibly also other production related expenditure | |
== Issues and Challenges == | == Issues and Challenges == | ||
| − | Formal modelling of cost risk (and its components) is in a rather nascent stage. It is not one of the recognized regulatory [[Risk Type | risk types]] that attract capital requirements. | + | * Formal modelling of cost risk (and its components) is in a rather nascent stage. |
| + | * It is not one of the recognized regulatory [[Risk Type | risk types]] that attract capital requirements. | ||
[[Category:Revenue Risk]] | [[Category:Revenue Risk]] | ||
[[Category:Risk Elements]] | [[Category:Risk Elements]] | ||
Revision as of 17:10, 15 January 2023
Definition
Cost Risk is the risk that product origination costs for achieving a planned amount of business will materially deviate from the expected amounts due to external or internal factors.
Causes
Cost risk can be both due to both internal and external factors:
- External factors comprise primarily of the market and competitive landscape
- Internal factors include the ability to control variable costs without demotivating or losing staff. The cost metric will be primarily referencing variable staff costs but possibly also other production related expenditure
Issues and Challenges
- Formal modelling of cost risk (and its components) is in a rather nascent stage.
- It is not one of the recognized regulatory risk types that attract capital requirements.
