A Successful Operational Risk Program 1. Framework
“A clear strategic direction of your company should help formulate clear business objectives, understood by all stakeholders, including employees,” said Brenda Boultwood, SVP, Industry Solutions at MetricStream. An operational risk may be seen as something, together with credit or market risks, which impedes “achieving those business objectives” and includes IT risk, HR risk, and reputation risk. MetricStream is a provider of Governance, Risk, Compliance (GRC) management software and consulting. Boultwood was the first of two presenters at a GARP-sponsored webinar on April 8, 2014 that attracted about 2,000 registrants. Operational risk has evolved from conceptual to strategic, and is now […]
Commercial Credit Analytics 2: A Missed Opportunity
Many banks are wasting the loans data they capture, according to David O’Connell, Senior Analyst, Aite Group, a financial services consulting group. This posting summarizes the second half of his webinar organized by the Global Association of Risk Professionals on February 20, 2014. O’Connell contrasted marketing teams with underwriting teams. Marketing teams use predictive analytics to decide which customers are most likely to respond to certain campaigns. They are very forward-thinking in devising the “customer next best action,” he said. O’Connell encouraged the credit and underwriting teams to have a similar outlook—to also make use of predictive analytics to determine “borrower […]
Commercial Credit Analytics 1: Under-utilized Tools
“There is a surprising under-utilization of common tools,” said David O’Connell, Senior Analyst, Aite Group, a financial services consulting group, during a webinar organized by the Global Association of Risk Professionals on February 20, 2014. He was referring to a survey by Aite Group of about twenty North American commercial loan underwriting professionals (responses as at quarter end Q3 2012). O’Connell characterized the under-utilization as “surprising” because loan underwriting is such an important part of banking. O’Connell was formerly a loan underwriting and loans officer, and was clearly familiar with the details of commercial lending and its role in “Banking […]
Stress Testing, Part 2: Data, the River
A common theme throughout contemporary financial stress testing is “data, the risky river,” said David O’Connell, Senior Analyst, Aite Group, a financial services consulting group. He was the second of two speakers to address issues around data in stress testing in a webinar organized by GARP on January 28, 2014. The recent financial crisis has permanently altered the relationship between the central bank and all other financial institutions, said O’Connell. The central bank is now looking at them as potential customers for a line of credit, and thus must carry out due diligence including asking for proof that the financial […]
Stress Testing, Part 1: The Data Mountain
Demands by regulators for increased frequency of reporting and more granularity of data in financial stress testing “are creating a data mountain,” said Jon Asprey, VP Strategic Consulting, Trillium Software. He was the first of two speakers to address the issue of data in stress testing in a webinar organized by the Global Association of Risk Professionals on January 28, 2014. He contrasted the new demands with early (pre-financial crisis) days of Basel reporting, when the summary level was sufficient. The data mountain has a significant impact on financial institutions, creating “the month-end panic,” Asprey said, since reporting at most […]
Basel, the Big Picture: Tackling Risk Aggregation & Reporting. Part 2
“What [should we] look for in a risk aggregation solution?” asked Renzo Traversini, Director of Europe, the Middle East and Africa & Asia-Pacific, Risk Management Center of Excellence at SAS. He was the second of two speakers at a GARP-sponsored webinar to discuss the recently released Basel paper, Principles for Effective Aggregation and Reporting of Risk Data. Traversini focussed on the “nuts and bolts” of how to aggregate and report risk data. SAS is one of the major suppliers of information technology (IT) solutions in financial risk management. Timeliness is crucial to a good reporting system. Traversini began by showing […]
Essential Mathematics for Economics and Business
Jonny Zivku, Product Manager at Maplesoft, gave a tour of the web-based tutoring and assessment product Maple T.A. on November 12, 2013. To highlight its features, Zivku drew on content that was tailored specifically for Essential Mathematics for Economics and Business by Teresa Bradley. This is one of the leading introductory textbooks on mathematics for students of business and economics, and was recently re-issued in its fourth edition by John Wiley & Sons. Each chapter of the book is structured with an overview, explanation, and applications. Students who do the exercises can check their answers against solutions given at the end of […]
Credit Workflow Optimization: A Practical Approach
“How can an institution practically approach credit workflow when it might not be streamlined? How can we optimize existing processes?” These questions were posed by Justin Huhn, Credit Assessment & Origination Practice Leader at Moody’s Analytics Enterprise during a webinar arranged by the Global Association of Risk Professionals on September 24, 2013. Huhn noted that, as of Q1 2013, there were over seven thousand insured commercial banks and savings institutions in the US excluding foreign branches. These financial institutions tend to develop silos of expertise. Workflow optimization is of pressing concern to many. In 2008 the American Bankers Association estimated […]
Graph Analytics: A New Approach to Risk Management
According to the World Economic Forum, “personal data is becoming a new economic asset class, a valuable resource for the 21st century that will touch all aspects of society.” The New York Times likens big data to a resource like crude oil. What, then will extract the useful component from the raw data? What reaction vessel will synthesize new things from the raw data? Cray, the supercomputer company, has a spin-off data manipulation company, Yarcdata, that specializes in graph analytics. Graph analytics refers to models of complex networks of data in a graphical representation of nodes and edges. “Analysis of […]
Leveraging Risk Analytics. Part 2
“To drive competitive value, a business must build situational context,” said Tom Kimner, Head of Americas Risk Practice & Global Risk Products at SAS. “And it’s extremely important to take the holistic view.” He was the second of two speakers at a GARP webinar on September 17, 2013 on leveraging risk analytics to drive competitive advantage. To build situational context, Kimner noted the analytics system must provide prediction and data mining, alternative sourcing, and optimization. “Build context for the data as it is used.” The different types of return metrics will help determine what is “best” in relative terms. Kimner […]