Economic Cost of Risk (ECOR)

The traditional measure of risk exposure, total cost of risk – TCOR, does not typically account for fluctuations in loss from year to year. In the modern risk environment, senior leaders need to understand and account for this volatility. Our ECOR measure looks at volatility through an implied risk charge (IRC) which is added to the traditional TCOR equation. IRC calculates the cost of volatility unique to each company through a combination of risk volatility and cost of capital. Our ECOR analytical framework integrates risk management decision making and financial planning.