Best Practice and Basel II Compliance

Best Practice and Basel II Compliance A comprehensive, modular solution to best practice risk management, derived from a triedand-tested architecture, built by the market leaders Quadrant Risk Management (International) Ltd Quadrant – Credentials and Partners  Fourteen years, four continents, 22 countries  All principals and senior consultants have operated at     board level in an authorised institution Each has successfully project-managed Basel II Gap Analysis and implementation missions We operate across the Strategic, Policy and Process levels Principals and Senior Consultants market, scope and execute all projects How/why did we choose our technology partners? (And why did they choose Quadrant?) 2 Selection of Quadrant Clients 3 Overview: End-to-end Solution 4 Module 1: Strategic Review and Gap Analysis 5 Overview: End-to-end Solution 6 Strategic Review: Credit Risk Example Materiality and Strategic Importance Retail (and subclasses) Now? 2007? Beyond? ? Regulatory Capital: SACR v. IRB-F v. IRB-A Data Availability and Quality Supervisory Discretion and Expectations Best Practice Benefits ? ? ? ? Corporate (with SME and SL subtreatments) ABS Banks Sovereigns and PSEs Equities ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 7 The Business Requirement: Op Risk Materiality & Strategic Importance + Reputation Corporate Finance Now? 2007? Beyond? ? Retail Banking ? Commercial Banking Asset Management Etc… Regulatory Capital: BIA v. SA v. AMA Data Availability & Quality Inherent Riskiness, & Supervisory Expectations Best Practice Benefits ? ? ? ? Trading & Sales ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 8 Gap Analysis Template and Implementation Plans 9 Module 2 : Data Mapping 10 Module 3: Data Integration 11 Data Mapping Template  Manual approach – Predefined spreadsheets for data mapping with target elements in place.  Semi-automatic – Using e.g. PowerDesigner to define mappings and produce simple code (or using other ETL technologies) 12 Process Mapping Template  Interstage Business Process Manager’s Development Manager allows for the definition of business processes using a simple drag and drop GUI  Rich variety of node types, each with pre-defined behaviour, allows for rapid process mapping to incorporate automatic and interactive processing of business rules 13 Module 4: Enterprise Risk Repository 14 Storing Analytical Data – the Enterprise-wide Risk Data Repository – 15 The Transaction … 16 … v. The Customer … 17 … and The Results 18 19 Op Risk Life-cycle … 20 Op Risk Events … 21 … produce Op Risk Results: 22 23 The Role of Business Process Management in Disclose Optimise Identify Problem areas and make improvements Model Manage Feedback from Risk Analysis To “Operations” Model Business Processes for handling Operational Risk Loss Events and CRSA Data Automate Capture Basel II Loss Event Data and CRSA Data Integrate Enterprise Risk Data Repository Risk Engine 24 Interstage BPM for Integrated Solutions Applet Servlet App. Server Stand Alone 100% Java Java (Model) API RMI Email Adapter Interstage BPM Engine Business Processes DB Adapter DMS Adapter Integration JavaScript Adapter Directory Services Adapter Java Actions Java Agents Web Services 3rd Party Adapters RMI Applications •External Applications •Databases •Legacy Systems •Web Applications 25 Data And Process Views of Data View Gap Analysis Solution Process View Data Mapping Process Modelling Data Integration Enterprise Risk Analytical Engine Process Automation Process Feedback 26 Business Process Benefits  Business processes appropriate to specific loss events – Process Flows – Business Rules – Front End Applications  Data Capture for Operational Risk Loss Events using new process instances Data Capture for Control Risk Self Assessment (CRSA) through business processes Audit and measurement of risk processes Feedback loop for continuous improvement Auto sensing of Risk conditions via process feedback Exception handling via process feedback      27 Module 5: Analytical Workbench 28 Module 5: Analytical Workbench  Based on SPSS Base and SPSS Clementine  Prediction – Taking past behaviour and predicting the future. PD Modelling….  Data Mining  Basic Basel II Calculations and results – Run supervisory formulae 29 30 31 Module 6: End User/Executive Dashboard 32 Enterprise Risk Management at a glance 33 Web Based, different levels of access 34 Enterprise Risk Management Portal Limit/Thresholds Management 35 Enterprise Risk Management Portal Risk Manager – OLAP Analysis and Ad-hoc Drill down to the lowest level 36 Best Practice Risk Management 37 Overview: End-to-end Solution 38 Basel II And Best Practice Solution Value Proposition Review  Pre-built business and physical models optimise project timelines and operational access to data  Based on proven deployments and risk management experience and expertise  Flexible design and methodology  Enterprise-wide scope  Database independence  Integrated models and infrastructure  Save Resources … Half the effort  Save Time … Faster regulatory waiver  Save Money … Reduced cost Safe Smart Savings 39 Best Practice and Basel II Compliance A comprehensive, modular solution to best practice risk management, derived from a triedand-tested architecture, built by the market leaders Quadrant Risk Management (International) Ltd