IBS Journal September 2016
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he adds. “If you start to see there’s probably a reason for the speed limit and I should drive according to it and think about why I can only go 20 miles per hour, then It takes a long time because the people at the front end of the business aren’t necessarily used to having a conversation with the treasury and they’re now expected to be part of that dialogue about the risks they’re taking, why they’re taking them and where the organisation wants to move in order to get the most advantageous
risk-aware returns.”
In order to reap the rewards offered by risk analytics, however, there must first be a culture shift, particularly amongst front-office staff, observes Cree. “Maths is pretty easy. You can always build a skill set to do some maths. But you need to get someone to care about what that math is telling them and to understand that chasing a piece of business can actually end up losing you money.”
Case study
The looming IFRS 9 deadline is giving banks plenty to ponder on. A large regional UK bank approached Moody’s Analytics to help fix an “existing model landscape” that was “developed in a haphazard manner” and was “not optimal in terms of risk aggregation and automation to meet the longer term needs of the bank for regulatory compliance, IFRS 9 loss provisioning and their evolving portfolio business requirements”.
Moody’s answer was to incorporate better and more granular analytics at the top of the house and the front line, and help the bank to reduce complexity. As part of the process, Moody’s Analytics is required to reduce the total number of financial models deployed by the bank and ensure also that
the appropriate models are aligned and deployed This leads to greater integration, economies of scale and operational efficiency are achieved top-down as well as enabling the business at the frontline.
“Banks have to get more granular,” says Guner. “So far most of what’s happened has happened at the top level. A lot of these new analytics revolve around setting the risk appetite but to really get into the business and the dissemination of product regulations you need to get into more granularity in analytics. This wasn’t really done at the regulatory wave but in order for banks to reap business rewards they will need to get much more granular, and they need to have a very clean set of data as well.”
www.ibsintelligence.com
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