What is Exposure
- Anthony Peccia
- Sep 3
- 1 min read
Think about how you would define it unambiguously and ensure completeness so all the exposures are captured and are consistently used throughout the organization.
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Exposure is the specific way the bank can actually lose money or reputation.It’s not everything that could go wrong—it’s only the part that leads to real financial or reputational loss.A clear definition helps everyone in the organization talk about the same thing and capture all the true loss points.
Our class emphasized that controls or bad processes are not exposures—those only change the likelihood or severity.
What I find compelling here is how exposure becomes the anchor of the whole RMF. Controls manage how often the exposure escapes its limits, resilience manages impact when it does, and governance ensures those two functions actually operate. If the exposure layer is vague or incomplete, everything downstream becomes reactive rather than designed.
Exposure is the event that leads to a loss, or the type of a loss. It has 2 categories, financial and reputational.
Once exposures are mapped properly, you almost get a parallel P&L that shows where value can leak out of the firm. For me, exposure is defined at the outcome level, but the real challenge in actual institutions is keeping that inventory honest when people want to relabel losses as isolated incidents or just control failures. A good exposure taxonomy feels as much about governance and culture as it does about analytics, because it quietly shapes which types of loss the firm is really willing to see and talk about.
One thing I’m thinking about: in real incidents where reputational and operational risks blur, how strict should the “mutually exclusive” rule be before it becomes oversimplified? Overall, very clear and applicable for day-to-day operational risk work.