powerpoint presentation

RiskOrigins Value Proposition Drivers, Challenges and Benefits

June, 2016

2 Modernizing Commercial Credit Origination

A Need for Change? 1


Banks are looking beyond regulatory readiness to provide an infrastructure supporting pro-active risk and capital management

Supporting risk-aware decision making across the enterprise - not simply supporting the adminstration of risk

Through an efficient and optimal business process supported by modern, simplified risk architecture to retain and increase customer base whilst improving profitability

Managing Risk – from compliance to competitive edge

Today, leading Banks see effective Risk Management as a core transformational pillar that can provide competitive advantage


But Financial Institutions are burdened with a legacy

Investment in data centred on retrospective transformation in support of capital calculation

System Investment focused on Trading and Retail segments

Wholesale loan losses were relatively low

Prior to 2008

…with the result that commercial credit systems are frequently more than 20 years old and very disjointed


Documentation Documentation

KYC KYC

Collateral Perfection

Collateral Perfection

Credit Approval

Pricing

Collateral Take-on

Product setup

Meet client

CRA

Negotiation of docs

Opportunity pipeline

Emails

Completing internal forms

Reviewing docs Completing

external forms

Meetings

Updating systems

Phone calls

CP’s Met?

Documentation

Monitoring

Hard copy of docs

Meet deal team

Product setup Product

setup SLA

CRA Risk

Grading

With a web of inter-connected activities supporting the commercial credit origination process

…the process is heavily reliant on manual intervention and duplicate data entry with much of the data unavailable for downstream use


The Impact of Legacy Disparate Sources

of Risk Data

Manual, Paper Based Process

Slow ‘Time to Cash’

No Sngle, Consistent Source of Truth

Inconsistent Credit Underwriting Processes

Duplicate Data Entry

Ageing Systems Architecture

No Integration of Risk Appetite

No Assessment of Profitability (Risk Adjusted)

No Covenant Tracking

No Pipeline Management

Poor Data Integrtity

Sub-Optimal Risk & Performance Assessment

Rear View Mirror Approach

Competitive Disadvantage

Inability to respond to Regulatory

requirements accurately

Unintended Risk Concentrations

Characteristic Impact Bottom Line


Meeting the Challenge with RiskOrigins™ 2


RiskOrigins was designed to meet the challenge Productivity

» Single repository for credit and risk related data – removes silo’s

» Enables validation of data at point of initiation

Integrated Data

360 degree view

Decision Support

» Supports complex borrower relationships and deal structures

» Provides a singular consolidated view of risk from deal to portfolio level

» Monitors the health and performance of the borrower and deals throughout their life

» Full auditability and traceability of approval, conditions and covenant adherence

» Complete assessment of borrower grading and deal profitability

» Identify the impact of new deals within the risk appetite framework

» Supports streamlining and standardization of credit underwriting process

» Reduces inefficiencies and improves ‘Time to Cash’ for customers

Risk Control


RiskOrigins is a credit decisioning and monitoring platform that enables the rationalizationing of IT Architecture

» Review

» Risk Appetite Checking

» Approve

Approval » Process

» Negotiation

» Finalization

Finalize

» Facility structuring

» Risk Mitigants

» Risk Appetite Monitoring

Facility Structuring

Entity Hierarchy

Spreading

Risk Grading

Risk Mitigants

» Initial Offer

» Spreading

Draft

» Scoring

» Grading

Collaborate

Facility Structuring

Reports

Risk Appetite


Oversight and control of the entire relationship

Entity Management » Define and build legal and credit

relationship structures pivotol to accurate risk aggregation

» Gives Risk control of critical risk classications in a standard and consistent manner across the enterprise – improving data quality

» Provides the risk grade distribution & allocation within a relationship

Provides a consistent, platform for accurate risk data aggregation


Complete Risk Assessment of the Borrower

Financial Spreading, Risk Grading & Covenant Management » Consistent, auditable and transparent

data capture and historical archive for regulatory compliance

» Supports projections, peer group comparisons and for informed decisions

» Automated Financial Covenant Monitoring

» Ensures CP’s are satisfied before lending authorisation for improved risk control

» Supports ‘what-if’ capability to model stressed scenarios

Best practice leveraging 30 years of deployment of Risk Analyst


A 360 degree view of the transaction

Facility Structuring & Risk Mitigants » Supports simplistic and multi-layered

Facility structuring once in line with a standard data model

» Consolidates loan utilisation for accurate determination of facility risk

» Creates supporting risk mitigation and facility allocation relationships enabling accurate LGD determination, deal pricing and the quality of the proposed deal

» Flexible data model allows Bank to easily extend as the business extends its offering portfolio

Captures critical information accurately as data – not description text


Collaborative and productive environment

Collaborative Business Process Framework » Flexible workflow framework integrated

with all modules supporting the initiation and approval process

» Enables collaboration between Business and Risk users to adopt an efficient and lean process delivering reduced ‘Time to cash’ for customers

» Tasks can be assigned to available staff to maximize productivity – track against SLA’s

» Analysis of activities and time consumed allows the identification of bottle-necks and optimal resource allocation

Reduces risk ‘administration’ and enables an improved customer experience


Pro-Active Risk Management

Risk Appetite & Limits Management » Incorporate Banks’ strategic risk appetite

framework in an operationally practicable and traceable framework

» Assess, monitor and manage limit concentrations and appetite at the single name and portfolio levels including geography, business unit and industry

» Critically supports assessment at point of facility origination to avoid wasted effort

» Enables improved capital allocation and top-down planning through risk appetite allocation in line with strategy

Replaces ‘rear view mirror’ approach and aligns risk appetite with business strategy


Powerful Business & Risk Reporting

Configurable dashboards enable bespoke report writing


Delivers improved productivity

Provides greater risk insight & control

Enables risk & reward assessment

Supports effective use of Capital

Improves integrity & availability of data

Reduces costs of data entry and errors

Robust framework for regulatory compliance

RiskOrigins aids establishment of strong risk culture


Avoids the mistakes of alternate approaches

» Workflow-centric approaches support continuation of data silos

» To support this complexity they are dependent on upfront definition and coding of business rules – ultimately, this does not support an evolving business model and process

» In some instances, they have proved out of date before the deployment has even finished

» Critically, they are difficult and costly to maintain and adapt as the bank evolves or even when integrating a new stakeholder or team into the process

» Many hinder the business, not help

Moody’s adopt a flexible approach to guide the user - not replace them

Automation does not equate to modernization


Supported by an incremental deployment approach

Risk Appetite

Credit Hierarchy, Facility & Mitigation Structuring

Current & Pipeline Consolidation

Text Spreading, Grading & Covenant Management

RiskOrigins is designed to deliver incremental capability and automation in line with your own experience and use in the initial phases


With an unrivalled network of expertise

Global network of experienced consulting and implementation resources spanning

16 offices in 11 countries

Global Reach

Today, nearly 2000 clients are using our Credit Assessment

and Origination Solutions

Extensive Client Base

Track record of continued investment in credit risk technology enablement and supporting evolving client needs

Commitment

Unrivalled team of risk and lending practitioners providing product,

implementation and process advice in line with leading practice

Deep Expertise


RiskOrigins Overview 3


RiskOrigins – available in three packages

RiskOrigins

RiskOrigins Structure

RiskOrigins Strategy

» Entity

» Spreading

» Risk Grading

» Covenants

» Credit Decision Workflow

» Operational Instructions

» Entity

» Spreading

» Risk Grading

» Covenants



» Facility Structuring

» Risk Mitigants

» Entity

» Spreading

» Risk Grading

» Covenants



» Facility Structuring

» Risk Mitigants

» Risk Appetite Management


RiskOrigins supports phased implementation

Cap

abili

ty

Deliver Application Innovation Benefits

RiskOrigins

RiskOrigins

Improve Data Quality to Drive Management Reporting Enhance Policies & Procedures to Align to Leading Practice Standards

Bank’s Current Processes and Peripheral Support

Current State

Future State

RiskOrigins Workflow and Additional Modules

Middle State

RiskOrigins Spreading and Scoring

Dashboard/MART Reporting

Entity Relationship Definition

Covenant Management

RiskFoundation Datamart

Collateral Management

Limits Module

Facility Management

Workflow

Dashboard/MART Reporting

Entity Relationship Definition

Covenant Management

RiskFoundation Datamart

Pricing

Dual Risk Rating – PD & LGD Models Spreading

Next Generation Dual Risk Rating – PD & LGD Models Spreading

Reduce Project Risks, Increase Application Acceptance and Enjoy Benefits Early


RiskAnalyst to RiskOrigins A Focus 4


Crowe FAMAS WinFast

Acquisitions made in the

1990s

Moody’s Financial Analyst 2000-2007 Financial Statement Spreading

~1,400 clients

Moody’s Risk

Advisor 2000-2010 Dual Risk Ratings

~65 clients

RiskAnalyst 2002 --

Spreading & Dual Risk Ratings

~950 clients

Moody’s has a track record for continued evolution

Lending Cloud 2014 –

SaaS Credit Decision Solution ~750 clients

RiskOrigins 2010 –

Credit Decision Solution ~30 clients


Financial & Rating Data Preservation

» RiskOrigins is designed to remove the risk of RA data loss and redundancy

» It is built around the infrastracture of RiskAnalyst providing continuity of; • RiskAnalyst usability • Financial and Ratings data structure and

organization designed to support model validation, versioning and data lineage

• Historical data retention ensuring there is no need to re-validate models

• Adherence to regulatory reporting requirements e.g. FRY14 and CCAR

• Archiving for back-testing and data mining • Progression to IRB approaches

Retains the capability of a proven, industrial application with 30 years of evolution

Avoid the risk and cost associated with data and model migration


Delivering Increased Business Value

» Ability to create WIP ratings to model the impact of stressed scenario’s

» Ability to copy previously created statements to further aid usability

» Identification and locking of a financial statement used to produce a rating for increased control

» Distribution of ratings through an entity hierarchy

» Tracking of approval and validation via the collaberative workflow framework

RiskOrigins supports credit quality assessment of the entire relationship


Feature Comparisons

Category Features RiskAnalyst RiskOriginsEntity Management Entity Information Y Y

Entity Management Entity Hierarchy N Y

Spreading Financial Spreading Templates Y Y

Spreading Projection Y Y

Spreading Peer Comparison Y Y

Spreading Ratio Analysis Y Y

Spreading Consolidation Y Y

Spreading Financial Report Y Y

Spreading Statement Lock N Y

Risk Grading Incorporate PD & LGD Scorecards Y Y

Risk Grading Multiple Rating Instances N Y

Risk Grading Override Y Y

Risk Grading Distribution N Y

Risk Grading Single Rating Report Y Y

Risk Grading Ratings History N Y

Risk Grading Copy Rating from Previous Rating N Y

Covenant Covenant Set Up N Y

Covenant Covenant Monitoring Tracking N Y


Feature Comparisons (continued)

*RiskOrigins 4.1 Release

Category Features RiskAnalyst RiskOrigins Facility Facility/Product Definition N Structure

Facility Limits Aggregation N Structure

Risk Mitigant Collateral N Structure

Risk Mitigant Guarantee N Structure

Risk Mitigant Allocation and Coverage Ratio N Structure

Configuration Template Modeler to configure Facility/Product/Risk Mitigant N Structure

Reporting Portfolio Reports, Datamart N Structure

Workflow Workflow for Credit Approval process N Structure

Workflow Workflow for Operation Tasks N Structure

Workflow Credit Presentation and Credit Document Generation N Structure*

Workflow Data Snapshot Y Structure

Workflow Alert/Notification N Structure

Workflow Audit Trail N Y

Workflow Roles - User Access Management N Y

Documentation Attached related documentation N Y

Analytics RiskCalc, CreditEdge Y Y

Risk Appetite Risk Appetite and Limits Management N Strategy