Ideally risk information reports should be: The right type; correct and certified as such from source to report; delivered in a timely fashion, consistent and uniform between client functions; capable of consolidation across asset classes and dynamic with the ability to drill up and down. CPRA has proven experience in helping clients achieve their objectives for risk reporting, whether as part of a new system development and implementation or utilising existing infrastructure
Risk Report Healthcheck
CPRA has undertaken appraisals of clients’ existing reporting to determine actual usage patterns and potential for streamlining. It is a simple and effective exercise and a first step in ensuring that the right risk information is being used by all parts of the institution. CPRA is conversant in both the front and middle office functions of the bank, which enables the healthcheck to be effective and accurate.
Business User Requirements
Gathering user requirements and, most importantly, obtaining consensus between Risk and Front Office is a key component of any risk reporting structure. CPRA’s consultants have experience in navigating this process and ensure that it can engage both parties to enable a uniform view of risk to be created.
GUI Design and Development
Development of custom reporting frameworks or prototype applications for handover to in-house IT have featured in our client project work. Such development is normally combined with a CPRA SME to ensure that data and information is properly transformed and displayed. Examples include a P&L attribution / P&L explain prototype and a C#/OLAP cube powered interface for credit derivatives.
With enhanced regulatory scrutiny and increasing demands to map market risk to P&L performance a robust approach to P&L attribution is now a business must-have. The ability to map risk sensitivities, which itself requires the consistent application of approved valuation models, with the market data used for pricing allows senior management to tie-up risk and performance in a single set of numbers and also to drilldown on discrepancies. Appropriate P&L attribution is core to ensuring a robust control framework operates across trading and asset management businesses.
To find out more about P&L attribution: contact Peter Griffiths on our P&L attribution team
Systems and Processes
Deployment of methodology into systems, keeping them current in the face of new products, new risk measures and management demands can lead to a progressive divergence between user requirements (and their assumptions) and reality.
Translating a quantitative methodology into an effective working system can not always just rely upon a technical and business specification. CPRA’s methodology development always has one eye on implementation feasibility or, where we have not been involved in the methodology development, we can help interpret methodology into a process that works with the infrastructure and system.
System and Process Analysis
A data deep dive is often the only way of ensuring that data sources, data transformation and calculations are correctly applied. CPRA’s experience of conducting such analysis often reveals disparities between assumed or documented methodology and actual practice. Such an analysis is often combined with the Report Healthcheck.
Market Data Analysis
Selection of the appropriate interest rate curves from the available universe, the type of probability of default from a rating cohort and determine the liquidity score threshold for CDS data are all examples of key decisions that can affect the acceptance and reliability of risk and P&L information. CPRA has a market orientated approach to help clients decide which data are practically reliable, available and conform to market convention.
Data Analysis and UAT
Though the methodology may be sound and inputs correct, from a user point of view, does the output make sense? Are pathological cases dealt with in an appropriate manner? The provision of CPRA’s Subject Matter Expertise and Quantitative Business Analysts can make this process more informed and straightforward.
We offer project management that is practical and pragmatic, this can be in the form of a consultant with front office experience who can readily engage with Sales and Trading or quant groups, or in the form of Project Managers who have several years working with Front Office, finance and risk functions.
We use appropriate project management tools in environments that are familiar and conversant with them. In environments where such tools are not as typical we can still effect project management in a language that is appropriate to that environment.