FSRM - PRMIA
FSRM - PRMIA
FSRM - PRMIA
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Financial services risk<br />
management – Description &<br />
key perspectives<br />
March 24 th 2011
Ernst & Young - Who we are<br />
Global<br />
Americas<br />
6,000 Advisory<br />
professionals<br />
* EMEIA – Europe, Middle East, India and Africa.<br />
140 countries | 144,000 professionals<br />
Advisory Assurance Tax Transaction<br />
EMEIA*<br />
9,600 Advisory<br />
professionals<br />
March 24th 2011 Page 2 Financial services risk management – Description & key perspectives<br />
Asia Pacific<br />
3,500 Advisory<br />
professionals
Ernst & Young Advisory - Who we are<br />
Strategy<br />
market Business<br />
performance<br />
market<br />
Ernst & Young<br />
Advisory<br />
Systems integration<br />
and outsourcing<br />
market<br />
March 24th 2011 Page 3 Financial services risk management – Description & key perspectives
Ernst & Young Advisory - What we do<br />
. Financial<br />
services risk<br />
management<br />
(<strong>FSRM</strong>) group is<br />
IT<br />
assurance<br />
Internal<br />
controls<br />
Internal<br />
audit<br />
Risk<br />
transformation<br />
Sustained,<br />
measurable<br />
results<br />
Enable<br />
Change<br />
Enable change<br />
Finance<br />
IT advisory People and organization Strategic direction<br />
Supply<br />
chain<br />
Customer<br />
Program management<br />
Our business performance capabilities help you protect your<br />
business, improve your performance and enable change.<br />
March 24th 2011 Page 4 Financial services risk management – Description & key perspectives<br />
part of the<br />
Advisory<br />
services practice
<strong>FSRM</strong> – What we do<br />
We consistently review the market<br />
place across the world…<br />
•Based on our<br />
knowledge, our<br />
competencies and<br />
skills, we can pursue<br />
a continual analysis<br />
of the worldwide financial<br />
risk market to develop<br />
various solutions (e.g.<br />
methodologies,<br />
learning tools, etc..)<br />
which will help to resolve<br />
our client typical<br />
risk issues<br />
… to provide to our financial services clients a broad range of services<br />
► Economic Capital & Risk-Adjusted Performance Measurement<br />
► Enterprise Risk Management & Governance<br />
► Credit risk, Market risk & Operational risk<br />
► Regulatory risk and compliance<br />
► Liquidity risk<br />
► Treasury advisory services (TAS)<br />
► Quantitative advisory services (QAS)<br />
► Derivatives valuation center (DVC)<br />
March 24th 2011 Page 5 Financial services risk management – Description & key perspectives
<strong>FSRM</strong> buyers & services<br />
Functions<br />
Risk<br />
►Chief risk officer<br />
►ERM<br />
►Heads of risk depts<br />
►Head of model validation<br />
Credit Risk<br />
Operational Risk<br />
Internal Audit (all services offered)<br />
►Chief compliance officer<br />
Market Risk<br />
Liquidity Risk<br />
Treasury<br />
►Treasurer<br />
►Head of liquidity<br />
►Head of capital<br />
EC & Risk-Adjusted Performance Measurement<br />
ERM & Governance<br />
Finance<br />
March 24th 2011 Page 6 Financial services risk management – Description & key perspectives<br />
QAS<br />
Regulatory Risk & Compliance<br />
Treasury Advisory Services<br />
►CFO<br />
►Middle office<br />
►Head of Regulatory reporting
Our approach could be summarized in three<br />
critical activities<br />
Risk and control activities<br />
Assess<br />
Improve<br />
Monitor<br />
Understand business objectives, initiatives, evaluate key risks;<br />
validate and prioritize<br />
risk profile; define improvement and monitoring efforts<br />
Improve the design and/or operating effectiveness of<br />
processes and controls; leverage leading practices and<br />
industry insights<br />
Validate that processes are operating as designed, controls are<br />
effective, and risks are properly managed<br />
Key considerations for management<br />
► Does our culture encourage taking the right risks to drive<br />
business performance?<br />
► Have we prioritized our key risks and aligned resources<br />
accordingly?<br />
► Can we improve alignment and coordination in risk and<br />
control activities?<br />
► Are we leveraging industry best practices on managing and<br />
controlling key risks?<br />
► Do we have the proper oversight on key controls?<br />
► How are risks monitored and escalated?<br />
March 24th 2011 Page 7 Financial services risk management – Description & key perspectives
<strong>FSRM</strong> - Global team<br />
� Network of more than 900 professionals worldwide focused on the<br />
needs of business leaders, boards of directors, chief risk officers,<br />
chief financial officers and chief compliance officers<br />
� Risk management and regulatory professionals based in all major<br />
financial centers<br />
� Alignment with professionals from our Actuarial services, Business<br />
risk services (BRS), Performance improvement (PI), Transaction<br />
advisory services (TAS) and Technology and security risk services<br />
(TSRS)<br />
March 24th 2011 Page 8 Financial services risk management – Description & key perspectives
<strong>FSRM</strong> - Our team in Americas and Montreal<br />
Americas<br />
Montreal<br />
• Lead by Hank Prybylski<br />
• Network of more than 440 partners and consultants mainly specialized in<br />
various industries like banking and capital markets, asset management,<br />
insurance, energy and corporate treasury<br />
• Lead by André Grondines<br />
• More than 15 professionals with significant experience in risk management<br />
across various industries like banking, insurance, asset management,<br />
energy, transportation, etc…<br />
March 24th 2011 Page 9 Financial services risk management – Description & key perspectives
<strong>FSRM</strong> - Key perspectives<br />
Changing Regulatory and Industry Landscape<br />
► Expanded banking supervision<br />
► Regulatory reporting – ad hoc and standard<br />
► Risk governance, ERM and risk appetite<br />
► Heightened compliance standards<br />
► Prudential regulation<br />
► Living wills<br />
► Regulation of SIFIs<br />
► Basel III<br />
► Higher capital standards<br />
► Liquidity standards<br />
► Capital/liquidity optimization<br />
► OTC derivative reform<br />
► Changing counterparty landscape<br />
► Consumer protection<br />
► Expanded compliance standards<br />
► Reform/return of structured finance market<br />
► Potential additional change<br />
► GSE reform<br />
► Business strategy change / consolidation<br />
Implications for Clients<br />
► Regulatory compliance and management<br />
► Management of increased rulemaking<br />
► Increased responses to regulatory inquiries<br />
► Compliance infrastructure<br />
► Capital and liquidity planning<br />
► Improved forecasting, stress testing and<br />
analysis capabilities<br />
► Integrated balance sheet management<br />
► Business strategy and reorganization<br />
► Pricing<br />
► Legal entity rationalization<br />
► Portfolio sales and acquisitions<br />
► Risk and finance infrastructure<br />
► Systems changes<br />
► Integrated data management/data quality<br />
► OTC derivative operations<br />
► Operations transformation<br />
► SIFI transformation to BHC-like standards<br />
► Regulatory standards implementation<br />
March 24th 2011 Page 10 Financial services risk management – Description & key perspectives
Bio and Types of mandates<br />
Akoum Bara, CFA, FRM<br />
Manager, Advisory Services<br />
Montreal<br />
Direct Tel: +1-514-879-2715<br />
Direct Fax: +1-514-879-2600<br />
Mobile: +1-514-318-2367<br />
E-mail: akoum.bara@ca.ey.com<br />
Background Types of mandates<br />
• Akoum is a Manager in Ernst & Young’s Advisory<br />
Services Practice and specialises in enterprise wide<br />
risk management strategy development and process<br />
implementation. Has worked for Hydro Quebec,<br />
Desjardins & McKinsey & Company<br />
• She has almost 10 years of experience in energy and<br />
financial sectors including more than 3 years in<br />
Strategy & Business Management Consulting<br />
Services management.<br />
• Akoum has an Master of Science from Laval<br />
University (Quebec, Canada) ; Certified Financial<br />
Analyst (CFA) ; Financial Risk Manager (FRM)<br />
• Languages: French, English<br />
Skills<br />
• Enterprise risk management strategy<br />
• Operational, market, credit and liquidity risk management<br />
• Validation & Stress Testing<br />
• Basel 2 & 3<br />
• Risk appetite / ICAAP<br />
• RAROC /Economic capital<br />
• Transformation process<br />
• Review the ERM system of a Canadian insurance company and proposed solutions to fill<br />
identified gaps.<br />
• Review the VaR model of a Canadian pension fund and proposed solutions to fill identified gaps.<br />
• Conduct a comprehensive diagnostic of the RAROC/EC system for a Canadian bank and propose<br />
solutions to fill identified gaps.<br />
• Develop and implement an EC/RAROC system for a Canadian bank<br />
• Perform a diagnostic of the risk management system and develop a heat map of residual risks for<br />
all the portfolios of a Canadian pension fund.<br />
• Perform an analysis of the impact of a social responsible investment policy on the risk/return<br />
constraints in the asset management industry.<br />
• Diagnose and redesign the corporate and commercial credit process of one of the Top 5 banks in<br />
an emerging country by (1) improving the credit approval process, (2) developing & implementing<br />
pricing and rating tools, (3) implementing new credit process and new risk culture across the<br />
organization.<br />
• Perform an analysis and quantification of the risk diversification impact on the economic capital in<br />
a bank.<br />
• Assisting a Canadian bank in addressing known gaps to Basel II AIRB compliance with respect to<br />
client's portfolio by (1) assessing the developmental evidence and model logic, 2) diagnosing and<br />
valuing a bank's loss given default and 3) Helping on the revision and completion of exposure at<br />
default<br />
• Design, develop and implement an application for the pricing of various N to Default Swaps, Credit<br />
Default Swaps and Collateral Debt Obligations.<br />
• Design, develop and implement a model to support the pricing of hourly and daily energy<br />
derivative products; also perform an analysis of the credit and market risks of tolling transaction.<br />
March 24th 2011 Page 11 Financial services risk management – Description & key perspectives
Questions ??<br />
March 24th 2011 Page 12 Financial services risk management – Description & key perspectives
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