A View from the Top: Credit Risk Management Dashboard Reporting ...
Algo Risk Application – Reporting Dashboard€¦ · · 2007-07-11Algo Risk Application –...
Transcript of Algo Risk Application – Reporting Dashboard€¦ · · 2007-07-11Algo Risk Application –...
Algo Risk Application – Reporting Dashboard
Curt BurmeisterDirector, Risk Solutions
Algorithmics
ERM SymposiumChicago
March 30, 2007
© 2007 Algorithmics Incorporated. All rights reserved.
Objective – flexible reporting tool
1. Integrate market risk, credit risk, and asset liability reports in a single dashboard
2. Easy to create and configure new reports
3. Rich set of visualization elements
4. Interactive and responsive
© 2007 Algorithmics Incorporated. All rights reserved.
Technical Approach
Client server approachThin web client that runs in a browserAggregation engine that runs on a Unix or Linux server
Position server for loading portfolio hierarchySecurityIntra-day updates
Raw simulation data stored in binary filesOptimized for disk I/O
© 2007 Algorithmics Incorporated. All rights reserved.
Step 1 - Create a report template
Choose a screen layout
Select and configure each element
Save the report
© 2007 Algorithmics Incorporated. All rights reserved.
VaR Report
© 2007 Algorithmics Incorporated. All rights reserved.
PV01 Report
© 2007 Algorithmics Incorporated. All rights reserved.
Lessons learned
Keep it simpleKeep frequently used menus and buttons visibleHide all the other stuff
Optimize the screen layoutEach user can customize the interface Ability to resize panels
Provide ability to “share” reportsPost to common area for retrieval by another userExport in pdf formatExport data in csv file
2ABN Amro/LaSalle Bank
Overall Dashboard Goal
•Achieve a consolidated view of risks within North America.
•Establish a sustainable process to assess and report a consolidated view of risks to governing committees.
•Continue to enhance reporting to provide a more forward-looking, integrated view of risk.
•Use enterprise-wide reporting as one means to increase accountability for risk management activities firm-wide .
“Everyone is a risk manager”
4ABN Amro/LaSalle Bank
Last Three Months…..
•Executive Committee embraced ERM program
•Regulatory pressure provided “wind at back”
•Created first dashboard draft as one component of ERM program
•Input from across organization
•Hub and spoke approach –no technology (yet)
•Launched final product, reviewed at Executive Committee on a monthly basis
DEC 06 JAN 07 FEB 07
5ABN Amro/LaSalle Bank
Commercial Real Estate Retail Credit Card Treasury Svcs. Total
Credit RiskMarket RiskOperational RiskInterest Rate RiskBusiness Risk
Capital Mgmt.AuditITLegalHRSOXAReputational
Key Performance Indicators
Keys to Success
Forward-looking, Actionable, Risk Escalation Tool
Integrated View of Risk, Reward and
Strategy
Executive Sponsorship
Comprehensive Risk Assessment
6ABN Amro/LaSalle Bank
Commercial Real Estate Retail Credit Card Treasury Svcs. Total
Credit RiskMarket RiskOperational RiskInterest Rate RiskBusiness Risk
Capital Mgmt.AuditITLegalHRSOXAReputational
Key Performance Indicators
Comprehensive Risk Assessment
7ABN Amro/LaSalle Bank
Forward Looking
Housing Market
6.0
6.5
7.0
7.5
8.0
8.5
9.0
Jan-00 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07150
175
200
225
250
Sales (left) Prices (right)Million units 000s $
Unemployment Rate
Fed Survey on Lending Conditions
Industrial Production
Slope of the Yield Curve
Corporate Profits
Equity Market Volatility (VIX)
High Yield Spreads
Interest Burden
Distress Ratio
S&P Outlook Distribution
Ratio of Downgrades to total Rating Actions
Proportion of SG issuance rated B- or lower
Economic Indicators
Financial Indicators
Credit Environment
U.S. Default Surveillance Tool Kit
•Business Risk Indicators
•Credit Risk Indicators
•ERM Stress Test
EL/P&L Impact
($mlns)Base Line
Stress Test
Net Increase
Non-Retail Credit RiskRetail Credit RiskAll Other Modeled RiskTotal Modeled Risk $ $ $ Captial for Un-modeled RiskTotal Assigned Capital $ $
Economic Capital
8ABN Amro/LaSalle Bank
Actionable Risk Escalation ToolConcerns Recommended Action
Market Risk
.
Credit Risk
Operational Risk
Other
.
9ABN Amro/LaSalle Bank
Integrated view of Risk, Reward and StrategyKey Risk Indicators 2007 Strategic Priorities
Key Performance IndicatorsTop 10 Risks – Heat Map
Bulger/MooreReport owner: Daw
Unacceptable Level Unknown - Need More Info Acceptable Level Un-Rated
Distribution of Risks by Probability and Impact
BE
F
G
H
IJK
L
M
0%
5%
10%
15%
20%
25%
30%
0 10 20 30 40 50 60
Average Expected Impact
Aver
age
Prob
abili
ty
Client/Corporate Credit Default (6)
Legal Risk (4)
General Economy Decline (4)
Declining Employee Morale/Loss of Top Employees (5)
Failed Business Practices (4)
Real Estate Decline (6)
Data Loss/Vulnerability (11)
Supplier Failure (2)
Regulatory / Ethical Failure (7)Material Unpredicted External Event (6)
Model Risk / Failure (6)
System / IT (7)
Control Breakdown (13)
Fraud Loss (9)
LOW RISK
MEDIUM RISK
MEDIUM RISK
HIGH RISK
Commercial Real Estate Retail Credit Card Treasury Svcs. Total
Credit RiskMarket RiskOperational RiskInterest Rate RiskBusiness Risk
Capital Mgmt.AuditITLegalHRSOXAReputational
Key Performance Indicators
Feb-07 YTD Target Status
Efficiency Ratio 60% 65%Revenue Growth (YoY) 10% 6%ROEC 25% 20%
Vision 1. Articulate vision/strategy & enhance internal alignmentEfficiency 2. Enhance productivity and efficiencyEfficiency 3. Services - optimize delivery & improve business alignmentEff & Growth 4. Credit Card TransformationGrowth 5. Develop enhanced capital management frameworkGrowth 6. Cross-sale/fee revenue growthGrowth 7. Third-market entry and/or in-fill acquisitionControls 8. Develop and implement ERM frameworkControls 9. Compliance: Transition to BAU, 'no surprises'People 10. Improve performance and talent managementPeople 11. Strengthen and unify our culture
10ABN Amro/LaSalle Bank
Executive Sponsorship
•Only one component of overall ERM program, endorsed by ExecutiveManagement.
•Each page of the 20 page report is owned by an Executive Committee member.
•Distributed to ERM Committee for determination of key risk issues for escalation to Executive Committee
•Distributed monthly and discussed at Executive Level for Action.
Agenda
About CognosCognos in Banking and Risk ManagementCognos’ Role in ERMHow Cognos Address ERM Dashboards and ReportingKey Barriers Overcome and Benefits of Using CognosLessons Learned and Critical Success FactorsA Picture is Worth 1,000 Words
Global Leader in Business Intelligence and Performance Management
$912.3 million annual revenue (T4Q)
$618.1 million in cash, no debt
Global coverage23,000+ customers in 135+ countries80% of Fortune 1000; target Global 3500Strong channel network: 3,000+ channel partners
Cognos employees –a competitive advantage
3,500+ employees890+ strong R&D team2,000+ customer-facing field force
Cognos: The Performance Management Leader in Financial Services
Cognos has over 500 financial services customers inNorth America alone; global penetration is approaching1,500 customers 10 of the top 10 US banks 9 of the top 10 European banks
In Risk Management, Cognos is used by dozens of the world’s largest banks for dashboards, reporting and analysis, including:
Cognos Role in Enterprise Risk Management (shown, for example, with IBM architecture)
Extract, Transform, Load (ETL)Information Integration
Source data
Customers
Loans &Collaterals
Other Sources
Market Data
Accounts
Transactions
Risk Cockpit
Compliance
Risk Mgt
Mgt Reporting
Enterprise Data Warehouse
Summary
AnalysisStaging
Area
SystemOf
Record
Classified Sources
Feedback
Data Marts
ROLAP
Relational
OLAPServer
Warehouse Mgmt & AdminMetadata Mgmt & Metadata Repository
% Risk
Engines
~ Score
BDW design
Profitability
Cognos Value in Enterprise Risk Management
Present Dashboards, Analysis, and Reportson risk in a consolidated manner across the enterprise, allowing more accurate and timely risk decisions
Create dashboards that allow risk executives to see key indicators for all risk types, across multiple data sources, ‘at a glance’Slice data as desired, such as regionally, by total position, by loan officer, by industry, etcPublish reports from centralized risk management group to risk managers, and allow self-service ad hoc reportingReceive timely notification of risk events, such as downgrades or crossing limits thresholds
Cognos Performance Management System
By INDUSTRYBy INDUSTRY By BUSINESS FUNCTIONBy BUSINESS FUNCTION
Planning,Budgeting,
& ForecastingConsolidation
Query&
ReportingAnalysis Event
ManagementScorecarding
&Dashboarding
B U S I N E S S M O D E L I N G
PerformanceManagement
Platform
PerformanceManagement
Solutions
Key Barriers Overcome and Benefits of Using Cognos
Barrier: “I can’t get a single view of enterprise risk”Benefit: Dashboard allows graphical view of multiple risk types, from multiple data sources
Barrier: “I have a great engine for risk calculations, but I can’t distribute the information quickly enough”
Benefit: Distribute reports to one person or 10,000 quickly with a user-friendly reporting product, including the appropriate levels of security (users only see what they are entitled to see)
Barrier: “I can’t get the reports I need quickly enough from IT, especially when I request something new or a small change”
Benefit: Provide users with self-service capability, allowing them to make updates or build new reports with minimal or no IT involvement
Barrier: “My dashboard product doesn’t allow me to drill down”Benefit: Cognos’ dashboard capabilities are fully integrated with reporting and analysis, allowing all types of reports for all types of users
Critical Success Factors
Data, data, data…the data must be trustworthy, or no one will use the dashboardThe business must be intricately involved in shaping the requirements…just because you build it does not mean that they will comeEnsuring that the right content is on the dashboard must supercede creating a pretty – but useless – dashboardUse the right product for the each component of your risk management architecture, for example:
Algorithmics for engineIBM for data warehouse, hardware and servicesCognos for dashboard and reporting
Additional Resources
Visit the Risk Management Resource Centres:
http://www.cognos.com/enterprise-risk-management.htmlhttp://www.cognos.com/risk_management/index.html
• Download James Lam’s executive White Paper • Demos, fact sheets, and more
Contacts:
Brad Jeffers, Director• [email protected]• 613.738.1338 ext. 5465
Laurence Trigwell, Financial Services Industry Director• [email protected]• +44 1344 707759