SasIntelligentEnterpriseRiskManagementBeyondBaselIi15Oct02

1、copyright 2002, sas institute inc. all rights reserved.intelligent enterprise risk management beyond basel iimalcolm listergeneral manager - financial services australia & new zealand sas institute australia pty ltdcopyright 2002, sas institute inc. all rights reserved.basel ii impacts all level

2、s of the enterpriseregulatorsboardbusiness unitsgroup risk managementintelligent enterprise risk management is needed to leverage the mass of data for competitive advantageoperating units group risk management nenterprise wide control over risk managementnpolicies and tools to be able to facilitate

3、and support bus and ousntransparent risk reportsncomparable databank overallnbest-in class standard for risk managementnpositive assessment from regulators, rating agencies, insurers: (basel compliance)nachievable strategiesbu management nefficient control environment (raroc)nlower capital chargeou

4、management noutperform competitors in pricingnclarity of risksnbetter performancenreduction of lossesneffective control environmentbu risk management nworkable methodology and toolsnfacilitate ou and bus to manage risks and to implement controlrisk management departmentscopyright 2002, sas institute

5、 inc. all rights reserved. operational risk jurisdiction risk settlement risk systems risk employee risk strategic decision risk purchasing risk strategic risk regulatory risk tax risk catastrophe risk currency policy sales risk competition risk elasticity risk predictive risk physical risk physical

6、 assets real estate manufacturing process supply chain liquidity risk funding risk market liquidity cpty/credit risk default risk downgrading market risk price risk (int. rate, ccy, equity, commodity) curve risk basis risk correlation risk option specific riskfinancialrisks enterprise risk platformr

7、apm - optimization enterprise-wide business unitbasel is only a catalyst - enterprise risk management must measure & optimize all types of risk capital copyright 2002, sas institute inc. all rights reserved.a true enterprise risk framework gives an organization the ability to examine all of the

8、layers within it. the result is a core that drives risk adjusted performance management throughout the organization. enterprise risk management framework layers of sophisticationbusiness unit exposuresenterprise risk exposuresoptimized risk capitalrisk adjusted performance management copyright 2002,

9、 sas institute inc. all rights reserved.substantial roi comes from the changing of behavior throughout the organizationnrisk adjusted performance management (rapm)nthis means . risk adjusted budgeting risk adjusted capital performance risk adjusted compensation etc. etc. risk adjusted decision makin

10、gcopyright 2002, sas institute inc. all rights reserved. risk solutionimprove bottom linemaintain/advance credit ratings. improve equity valuationimprove return/risk ratio on capitalimprove return on investment capitalrisk adjusted performance managementcorporate optimizationenterprise risk manageme

11、ntbusiness unit risk managementoptimize risk capital at enterprise leveloptimize risk capital at enterprise levelcommunicate corporate risk profilemanage the business - eventsthe risk solution must incorporate the intelligence needed for rapm to deliver needed roi copyright 2002, sas institute inc.

12、all rights reserved.intelligence is the common denominator in risknbusiness intelligence enables organisations to leverage their information infrastructures to drive the corporate vision towards risk and rewardrisk intelligence maturity stages12345data pointsdepartmentaldataenterprise informationval

13、ue chain optimisationshareholdervalue vision & innovationcopyright 2002, sas institute inc. all rights reserved.forward-looking analytic intelligence is the differentiator“an intelligence value chain thatgives you a complete end-to-end value proposition”point solutionsbenterprise dbaarchitected

14、ccopyright 2002, sas institute inc. all rights reserved.executive management attitude toward the value of risk - critical for investment in risk framework greatersophisticationcompliance &preventionavoiding own organisations crisesmanaging other organisations crisescomplying with corporate gover

15、nance standardsavoiding personal liability failureoperatingperformanceunderstand the full range of risks facing business todayunderstanding and evaluating business strategy risksachieving global best practicesprotecting corporate reputationshareholder valueenhancementenhancing capital allocationimpr

16、oving returns through value-based managementcopyright 2002, sas institute inc. all rights reserved.evolution of risk decision-making the future is integrated and forward-lookingfocus on revenue and cost managementmark-to-marketactivity-basedcostingtransferpricing1980svalue atriskrisk-adjustedperform

17、anceportfoliomanagement1990sfocus on risk control (historical focus)shareholder valueintegrated risk & profitability2000+fully integratedprofitability andrisk information forward-looking,not just static,management toolscopyright 2002, sas institute inc. all rights reserved.presentationrisk dashb

18、oard and reportinganalysisdata mining, analytics, value at risk modelingdatamanagementdata repository, data cleansingaccessaccess to multiple data sources, multi-platform risk management requires an end-to-end approachoperational optimizationstrategic advantagecopyright 2002, sas institute inc. all

19、rights reserved.operational risk is still a relatively new area risk management lifecycleadoptionmaturityrelatively slower advancementoperational riskcredit riskmarket riskliquidity riskasset/liability managementlevel of developmentcopyright 2002, sas institute inc. all rights reserved.operational r

20、isk is still a new area early adopters case study nmajor international bank has engaged sas to provide an operational risk infrastructure to meet its goals the bank is aiming to shifting capital reserves for the three major risk segments-market risk from 10% to 30%-credit risk from 70% to 40%-op ris

21、k from 20% to 30% compliance with basel ii and the reallocation is expected will reduce capital reserves by at least 5% - resulting in $167 million in freed capital per daycopyright 2002, sas institute inc. all rights reserved.operational risk a key area of ermcopyright 2002, sas institute inc. all

22、rights reserved.meridien: key features of operational risk architecture impacted by basel iisource: meridien research the emphasis from the bis is primarily around collecting and analyzing the data related to losses and key risk indicators, which then form the basis for assessing capital charge copy

23、right 2002, sas institute inc. all rights reserved. bis requires banks to demonstrate use of internal rating systems ino credit approval processo pricingo portfolio limit settingo lending authority levelso reporting other business applications includeo performance measurement o budgeting/strategic p

24、lanningo portfolio managemento customer relationship management (crm)requirements and business applications_ evaluate current situation (at business unit level) vis a vis requirements identify and plan tasks to close the gap start the embedding efforto communication and awareness building o reportin

25、go budgeting and strategic planningproject plan & embed_case study : major european global bankphase 1: project plan and embedthe new basel accord requires that the new risk and value measures are used actively throughout the organisationcopyright 2002, sas institute inc. all rights reserved.cas

26、e study : program raroc 2004 rating tool for member banks top down raroc by business unitphase 0 (2000) background design of 2004 master plan development of credit risk tools for all bank client segments methodologies for other risks operational risk insurance risk market risk transfer of knowledge

27、to bank teams data gathering for raroc and regulatory compliancephase i (2001-02) plan & data finalise mis implementation fine-tuning backtesting using new data recalibration of model parameters consolidation of experience and approval of internal models regulators other external parties ( eg rating agencies)phase iii (2003-04) practicephase ii (2002-03) implementation group level applications planning and budgeting performance management and compensation capital and credit portfolio management business unit applications pric