Tackling Risk Aggregation and Reporting

Original by SAS and GARP, 2012, 4 pages 

This summary note was Posted on

The Basel committeee wants banks to be able to produce risk data quickly, and in a manner that minimizes the probability of error

  • Originally released for comment in June 2012, the 14 principles cover a wide ground: Document BCBS 239, 27 age
  • Sytemic Bankcs (G-SIBs) face an implementation deadline of early 2016

The 14 principles can be regrouped into the following categories:

Completeness

  • What’s our exposure today, what’s our exposure in 6 months, what’s our exposure at the end of the year? Typically we don’t look at comprehensive and complete views of the forwards state of our risk management.

Timeliness

  • Data depends upon the nature of risk being measured
  • The ability to access more data more quickly is important and a key objective of many firms.
  • Turning the calendar back to early 2009, a particular European banking group needed 22 days from the end of the month to produce and manually adjust its monthly risk-weighted asset (RWA) estimates, according to Traversing; for RWA estimates it took 37 days.
  • The Basel Committe made timeliness a fundamental component of its 14 principles
  • Speed is most essential for Market Risk measures. On the other hand Credit Risk  especially in the retail wont see fast changes in profiles while Operational risks are relatively slow to change
  • CVA adjustment based on internal models requires a very smart computation architecture and the latest are based on in-memory analytics

Accuracy

  • Accuracy and precision are not the same thing
  • Focus on Accuracy and dont get sidetrack into precision

Adaptability

  • Banks should be able to generate aggregated risk data to meet a wide range of ad hoc reporting demands.
  • First focus on doing standard reports in an ad hoc time frame. Then enhance those reports.
  • SAS solution focuses on self-service visualisation and reporting allowing bank users to generate their own reports on the fly. Until recently this technologie was not available.
  • Part of adaptibility is the ability to assess emerging risks and new issues, liek reputational risk.
  • We need to have adaptable data to get us adaptable information so that we can make the best possible decisions for our firms

To go further a video whith a very excited guy,  at risk tech forum