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Article
Geopolitical shocks expose flaws in bank risk models
Krishan Sharma warns that traditional risk models are failing to capture fast-moving geopolitical shocks. Banks must adopt dynamic stress testing, integrated modeling, and qualitative overlays to better manage rising uncertainty and systemic risk.
Apr 20, 2026
Krishan Sharma, SVP, Model Risk - Regulatory Stress Testing and Capital Forecasting, Citi
Tags:
Model risk
The views and opinions expressed in this content are those of the thought leader as an individual and are not attributed to CeFPro or any other organization
- Traditional models
rely on historical stability that breaks during geopolitical shocks
- Correlations converge
under stress reducing diversification benefits
- Stress testing must
focus on velocity persistence and regime shifts
- Integrated modeling
needed to capture cross risk transmission
- Firms should
prioritize impact sensitivity over false precision probabilities
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