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UBS Group AG
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== Risks<ref>https://secure.ubs.com/minisites/group-functions/investor-relations/annual-report/2022/annual-report-2022/AR22-combined-digital/AR22-combined-digital/index.html#sub_book_0_1</ref> == === Credit Risk === Credit risk is a paramount concern in UBS's risk landscape. As a financial institution engaged in lending, trading, and investing, UBS faces the possibility that borrowers, counterparties, or debtors may default on their financial obligations. This risk extends across various products and services, including loans, bonds, derivatives, and structured products. To manage credit risk effectively, UBS employs rigorous assessment processes to evaluate the creditworthiness of counterparties and borrowers. This entails thorough analysis of financial statements, economic conditions, industry trends, and historical payment behavior. UBS sets limits on exposure to individual counterparties and sectors, mitigating the impact of any potential defaults. Additionally, the bank employs collateralization, credit derivatives, and credit insurance to further reduce credit risk exposure. === Market Risk === Market risk is another central concern for UBS. Given its involvement in trading, investment management, and proprietary trading activities, the bank is exposed to fluctuations in equity, fixed income, currency, and commodity markets. Volatile market conditions can impact the value of UBS's trading portfolio, investment holdings, and proprietary trading positions. To manage market risk, UBS employs sophisticated risk measurement models to assess potential losses under various market scenarios. Stress testing and value-at-risk calculations help quantify potential downside risks. Additionally, UBS diversifies its investment portfolio to spread risk across different asset classes, regions, and industries. The bank also employs hedging strategies, including derivatives, to mitigate the impact of adverse market movements. === Sustainability and Climate Risk === Sustainability and climate risk have emerged as critical concerns for financial institutions, including UBS. The changing landscape of environmental regulations, social expectations, and climate-related events can impact the bank's operations, reputation, and financial performance. Failure to address these risks could lead to regulatory fines, reputational damage, and stranded assets. UBS has incorporated sustainability and climate risk into its risk management framework. The bank assesses the potential impact of climate change on its portfolio, business activities, and clients. UBS also considers environmental and social factors when evaluating potential investments. By aligning its operations with sustainable practices and participating in initiatives related to environmental and social responsibility, UBS aims to mitigate potential risks and contribute to a more sustainable future. === Non-Financial Risk (Safeguarding Reputation, Operational Integrity, and Stakeholder Interests) === Non-financial risks encompass a wide range of concerns, including operational risk, cybersecurity, compliance failures, and reputational risks. These risks could lead to financial losses, disruptions, legal actions, and erosion of stakeholder trust. UBS employs a robust risk management framework to address non-financial risks. This includes comprehensive risk assessments, strong internal controls, and ongoing monitoring of operational processes. UBS invests in cybersecurity measures to protect sensitive data and prevent cyberattacks. The bank also maintains compliance with regulatory requirements and industry standards to mitigate legal and regulatory risks. By prioritizing operational integrity and reputation preservation, UBS seeks to maintain stakeholder confidence and uphold its standing in the financial industry. These elaborations on the most important risks underscore UBS's proactive approach to risk management, highlighting its commitment to safeguarding financial stability, operational resilience, and stakeholder trust.
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