The client is the subsidiary of a large banking group in France, which is active in Asset & Wealth Management, Corporate & Investment Banking, Insurance and Specialized Financial Services and Payments.
Noting the materiality and the complexity of the originate to distribute model, the client requested Avantage Reply to perform a gap analysis of its existing set-up in light of market practices and to design a multi-year roadmap to remediate identified shortcomings. In addition to this, the client sought clear recommendations as to how to implement and strengthen a robust Warehousing and Distribution risk management framework.
There were multiple challenges, stemming from the wide range of activities, the complexity of the products involved and the global footprint (US, Asia and Europe). Further to this, the existing framework was poor as the risk census of each product throughout its lifecycle was incomplete. This lead to incomplete risk measurement and monitoring coverage. This was compounded by a weak IT infrastructure and data quality.
The mission began with the conduct of an in-depth analysis of risk departments involved in the securitization monitoring across the bank. The approach used was 4 stage top-down approach. Firstly, highlighting the findings in the existing state; Secondly, identifying gaps between the target operating model and findings in the existing state; Thirdly, identifying requirements to remediated the gaps identified and finally, setting a remediation roadmap with a global action plan. Each stage was structured around the below five key topics:
A short term tactical solution was adopted, covering central and local monitoring & reporting. This involves the strengthening of the existing reports process by capitalizing on local expertise. Long term strategical solutions were adopted to review global governance. This governance review covers roles and responsibilities within different teams in risk departments and the creation of a data governance framework with the creation of a dedicated securitization database. In terms of monitoring, an overhaul of central and local indicators was adopted rather than a local-entity-specific solution.
The completion of the project has allowed local entities to comply with group requirements and minimum standards. The mandate was successfully completed regarding the design of all key steps for implementing the risk management framework. The implementation process is currently in-progress.