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Case Studies

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Case Study

Review and Update Corporate and Investment Risk Policies

Avantage Reply provided assistance to one of the world’s largest alternative asset managers to review and write an overarching risk policy framework document to replace the current Group Risk Policy and to update corporate risk policies.

Case Study

Development and Implementation of Collateral Management Framework for CCP/Non-CCP Cleared Products (incl. OTCs)

The client was seeking to document the Collateral Management (“CM”) Framework to ensure CRD IV and EMIR compliance. The CM Framework scope included all products subject to collateral requirements for Counterparty Credit Risk (“CCR”) mitigation, including CCP and non-CCP cleared products such as OTC derivatives. Avantage Reply provided the subject matter expertise required to conceptualise, develop and formalise the CM Framework.

Case Study

Collateral Management: Unlocking the potential in collateral

A Transactional Bank specialised in securities services sought a better understanding of the impact of recent market and regulatory dynamics in the collateral management business and in liquidity management, and wanted to test key working assumptions in the market. Avantage Reply was engaged to interview representative banks and use other sources of research, which resulted in the production of a paper the client intends to use in public presentations and in articulating their business proposition.

Case Study

Implementation of Basel III and CRD IV Requirements

Avantage Reply provided assisance to a leading an International Central Securities Depository (ICSD) to define and evaluate the business, operational and IT impacts of the introduction of Basel III and CRD IV.

Case Study

Model replacement review

This case study document describes a concrete project done by Avantage Reply for the subsidiary of the large international banking group in frame of the Client’s transition to the common Group’s risk management mathodology. The document desccripes the Client’s challenge, approach used by Avantage Reply to cover all aspects of the Client’s requirements and summarizes the key findings of the project.

Case Study

Risk analyst, Methodologies

This case study document describes a concrete project done by Avantage Reply for the subsidiary of the large international banking group in frame of the Client’s transition to the common Group’s risk management methodology. The document describes the Client’s challenge, approach used by Avantage Reply to cover all aspects of the Client’s requirements and summarizes the key findings of the project.

Case Study

Review of foreign exchange risk management capability

The client maintains a single currency ledger which does not capture the distinction between realised and unrealised exchange differences arising from non-functional currency transactions, resulting in an inability to manage FX rate risk. Avantage Reply was engaged to specify and report on the appropriate data capture systems and exposure management engine required to identify and quantify all FX transactional exposures. This report would form the basis for a functional specification used by IT to develop the appropriate systems and processes required to implement an effective FX risk management policy.

Case Study

Regulatory Compliance Strategy – Internal Ratings Based (IRB) Approach

The client was seeking approval to use the IRB approach to determine the credit risk regulatory capital charge on its retail exposures. Avantage Reply was asked to outline and agree the method of delivering ‘Use Test’ requirements within the client’s European retail market operations, as part of the client’s IRB approach application. Avantage Reply planned and implemented the key IRB steps required to achieve compliance within the regulator-imposed timeframe, while being mindful of the key risks and challenges for the programme.

Case Study

Property Management Information Database

The client required improved Management Information for its Property lending portfolio. Avantage Reply was engaged to design and deliver a solution using a rapid application design approach to ensure timely delivery.

Case Study

Project: Operational Risk – Controls ‘Self-Assessment’ framework

The client had identified that there was no cohesive view on the risk and control environment relating to its newly-created shared service risk function (SSRF), and were concerned that compliance with Group minimum standards on policy and controls were not being met or measured. Avantage Reply was asked to undertake a comprehensive review of the SSRF team’s existing operational risk framework, processes and practices to identify inherent risks, existing controls and gaps in the framework, and deliver the findings to the COO. A self-assessment controls testing framework was also established and remedial action was proposed to rectify inadequacies of existing processes and practices.

Case Study

Implementation of Regulatory Change in WBM

A UK Global Bank was experiencing difficulty in identifying and understanding the nature of the increasing profusion of emerging regulation. Furthermore it was not comfortable that the implications for its business and its ability to comply with the proposals were capable of being adequately evaluated.
Avantage Reply was asked to the above issues by delivering a sustainable solution that could be taken on by the clients.

Case Study

Economic Capital Calculation and Management Data

The client engaged Avantage Reply to manage its Basel II-related business analysis function within the scope of the Pillar 2 process, particularly the calculation of Economic Capital (EC). Avantage Reply provided three consultants to perform several functions integral to the creation of the EC calculation process, including functional design, data analysis, KPI creation and project management. The initiatives developed by Avantage Reply were compliant with Pillar 2 requirements.

Case Study

Economic Capital: Risk-based decision making and risk culture

The client initiated an Economic Capital (EC) project to embed a stronger risk culture throughout the institution reflected in a more robust risk-based decision-making process, by building an EC application “in-house” with the assistance of Avantage Reply. The objective of Avantage Reply’s solution was to enable the provision of consistent and reliable information appropriate to each decision maker, with the requisite sophistication and enterprise-wide coverage. The EC model provides many benefits including capital management reporting and strategic portfolio planning, the effective management of risk profiles, and the allocation of EC to each transation to facilitate risk pricing calculations for lending decisions.

Case Study

Credit Risk Weighted Assets Quantitative Impact Analysis

In order to engage in a QIS exercise Avantage Reply was consulted to develop a temporary solution that would source reliable data and enrich the data for the purpose of preparing the information templates required by the regulator, since the client had not yet fully implemented its Basel II platform.
Firstly, Avantage Reply defined and agreed the high level requirements of the exercise. Secondly, the Avantage Reply team engaged with the stakeholders in several countires to retrieve available data and establish data gaps and data quality issues. Besides, a set of assumptions was developed for any missing data and agreed with business owners.
This approach led to a timely and successful submission of the QIS templates, and marked milestone in client’s implementation of Basel II. Finally, an essential step in the discussion on the proper calibration of the new regulatory minimum capital requirements was taken.

Case Study

Credit Risk Operating Model

The underperformance of the client’s Credit Risk IT team, as indicated by a back log of approx. 200 change projects, was being driven by a number of factors: the presence of legacy IT applications, historical underinvestment in the team, and eroded relationship with the business. Avantage Reply transformed the client’s Credit Risk IT function by working as an extension of the client’s team in developing a common understanding of the target operating model and target architecture, developing a programme of work for the team, and organising the most appropriate resources for the team. The relationship between the Credit Risk IT team and the business has moved to one of partnership with an established record of delivery.

Case Study

Credit Risk Operating Model

To assist the client in maintaining control over its ever-increasing use of credit risk models and resulting ‘model risk’, Avantage Reply was asked to develop, implement and manage on an interim basis the client’s independent unit for model review validation. A governance framework and scope of responsibilities of the new model validation unit was developed and implemented, as well as the work plan for the review of the credit risk models required to fulfil the unit’s independent oversight and support activities. In addition to bringing increased understanding of and comfort with model risks, Avantage Reply also provided the client with knowledge of leading industry practices and access to a tested model evaluation methodology.

Case Study

Risk Model review - Income Producing Real Estate

The Basel II Accord has resulted in significant growth in the use of credit risk models for managing and pricing risk assets, leading to increased “model risk“ as a result. The client engaged Avantage Reply to assist with mitigating the model risk resulting from the use of the Income Producing Real Estate (IPRE) risk estimate model. Avantage Reply reviewed, documented and validated the IPRE risk estimate model for approval by the client’s risk governance committee, forming part of the client’s Basel II compliance programme. Follow-on work included KPI identification, back testing of results compared to the model’s historical and relative performance, input to the model governance framework, and knowledge transfer to client personnel.

Case Study

Credit Risk Model Waiver Application Process

The client was planning to adopt the Internal Ratings Based (IRB) approach to calculating credit risk, which required the submission of a Waiver Application to the UK regulator. Due to the complexity of the client’s IRB approach as a result of multiple information sources, contributors and complex concepts, Avantage Reply was engaged to coordinate the preparation of and review the Waiver Application. Avantage Reply worked with the client to create a waiver application pack, ensuring it was consistent in format and content, it was representative of the actualities of the client, and gaps with regulatory requirements were identified.

Case Study

Regulatory Requirements for Asset Securitisation

The client is a leading participant in the asset securitisation market. To be compliant with Basel II regulatory capital requirements, new enrichment data, calculations, systems, processes and reporting needed to be implemented. Avantage Reply was asked to manage the asset securitisation project for the European Business Unit, and to transition reporting into Product Control in the UK.

Case Study

Intra-group Liquidity Capacity Assessment

The client was considering applying for intra-group liquidity modifications from the FSA requirement for UK-based subsidiaries to be self-sufficient for liquidity purposes. Avantage Reply was engaged to evaluate the merits and feasibility of applying for such a modification, by assessing the liquidity capacity of UK-based subsidiaries and evaluating reporting advantages.

Case Study

Internal Capital Adequacy Assessment

The client was required to undertake its first formal internal capital adequacy assessment process (ICAAP), required by Pillar 2 of the Basel Framework. Avantage Reply was engaged to assist with structuring and executing the ICAAP, by utilising its extensive experience in preparing formal ICAAP submissions for many banks and investment firms. In addition to assisting the client in submitting a credible ICAAP report in good time, Avantage Reply also provided detailed practical recommendations for future improvements.