Aliriskinsäätö

Aliriskinsäätö is a Finnish term used in risk management to describe the process of adjusting the lower end or floor of risk estimates within a quantitative model. The concept is applied in fields such as banking, insurance, and finance to influence outcomes like capital requirements, pricing, and provisioning by ensuring that model outputs do not fall below a predefined minimum level of risk.

The main purpose of aliriskinsäätö is to stabilize model results and align them with risk appetite and regulatory expectations. Practically, it can involve imposing minimum thresholds or floor constraints on key risk parameters such as probability of default (PD), loss given default (LGD), or volatility measures. Methods used include parameter calibration, backtesting, scenario analysis, and governance processes to justify and monitor the chosen floors.

Applications of aliriskinsäätö vary by domain. In credit risk, floor levels may be applied to PD or LGD estimates to avoid underestimation of potential losses. In market risk, a VaR or volatility floor can be used to prevent overly optimistic risk readings in calm periods. In operational risk, minimum loss or frequency thresholds may be set for certain event data. The approach can affect pricing, capital charges, provisioning, and risk reporting.

Aliriskinsäätö is part of the broader risk governance framework, alongside risk appetite, model risk management, and stress testing. It invites careful consideration of bias, model assumptions, and regulatory alignment, since inappropriate floors can distort risk assessment or obscure genuine model performance.