IT&e’s Technology Services consultants provide a range of risk management services
and Treasury-based analytical services which are unique within the industry.
These services have discrete deliverables and are delivered within the overall
risk management methodology framework, which has been developed and refined for
over six years working within major banks and financial organisations globally.
IT&e has been acknowledged to be one of the leaders in providing risk management services
and advice to international banks, major financial institutions and stock exchanges.
This is a selection of the Risk Measurement Services IT&e can provide.
Risk Methodology
The Risk Methodology Service is designed for financial institutions
that are looking to improve the way they manage risk. This service analyses
a client’s current risk management methodology and recommends areas for
improvement based upon the client’s risk management requirements. There are
a number of different approaches to calculating and measuring market and credit risk.
There are advantages and disadvantages of each. The best method for a client depends
upon the composition of a client’s portfolio, the resource profile of the client,
the risk appetite of the client and the budget for risk management improvements.
This service will recommend and justify the most appropriate risk management
methodology for the client after a careful analysis of the areas of consideration.
Capital Calculation and Allocation
The Capital Calculation and Allocation Service analyses and recommends
the optimum method for calculation and allocation of economic capital within
the risk management application based upon the client’s business requirements.
This applies to capital arising from both market and credit risk.
There are a number of different methods for calculating economic capital within
a risk management application. The optimum method is a function of a client’s
business requirements and risk appetite.
Once risk and capital have been calculated, it is important to be able to
allocate these results to the appropriate areas of the organisation.
Again, there are a number of different methods for allocating this capital
and this service will recommend the appropriate method based upon the client’s
requirements. This may be a pre-implementation or an implementation service.
Risk Reporting
Risk management information is disseminated to a large number of
different audiences within a financial institution from senior managers
to risk managers to traders. The reporting requirements of these audiences
are very different and it is unusual that a risk management application
can cater for each audience without customisation. The level of granularity
of the reported risk numbers is also highly dependent upon the audience.
Senior managers will require high-level consolidated information that
reports risk across the whole enterprise. Traders will require much more
detailed information at the sub-portfolio level. Risk Managers typically
require the ability to report risk at a high level, but also require the
capability to drill-down into the risk results to analyse risks in more detail.
During the risk reporting service, we analyse the risk reporting requirements
for all users of the risk management application. This analysis includes
risk managers, senior managers, the middle office and traders. The required
risk reports and the appropriate risk hierarchies are defined upon completion
of this analysis.
Credit Mitigation
There are a number of different techniques for reducing credit risk.
These include applying netting and collateral provisions, cancellation agreements
and mark-to-market caps. Netting and collateral provisions often become very complex
due to the complicated organisational hierarchies of banks due to the large number
of subsidiaries and branches. This information is not typically held in a structured
form in an application that is easy to integrate. Instead, the information is normally
held within legal documents. One of the most complex areas of a credit risk management
project is representing the client’s credit mitigation agreements within the
credit risk management application.
With the credit mitigation service, we analyse a client’s credit mitigation agreements
and the form in which this information is held. We then analyse and recommend how
these netting and collateral agreements should be mapped into the risk management
application. We also recommend how the risk management application should cater for
new counterparties, new netting agreements or changes to a counterparty’s hierarchy.
Risk Model Definition
This service covers the analysis of the Risk Policy of a Financial Institution
leading to a paper based definition of how a Risk Management System is configured
to meet these requirements. The definition covers the Risk Policy from both the
Limit Management and Exposure Calculation perspectives.
