Banking technology requires tough processes and guidelines for developing robust internal models and to keep up with the escalating regulatory changes required by supervisory groups. Many times, the defined compliance regulations have failed to prevent major losses, hence, financial institutions are increasingly moving to expand their definition of risk by looking at other potential sources of risk and create their own tools for identification measurement, and mitigation. Path Solutions’ new GRC platform will facilitate all this at once.
GRC is a standalone platform that allows financial institutions to set up their enterprise risk management framework which covers financial and compliance risk mitigation tools. The platform provides a powerful, highly parameterized, and yet easy-to-use solution. It allows financial institutions to proactively manage their risks through various detailed management and analytical features such as what-if analysis, sensitivity analysis, and stress testing. GRC also offers ready-to-deploy comprehensive dashboards, reports, and analytics tools for both regulatory and the institution’s own risk management needs.
Regulatory Capital Reporting
This component offers an end-to-end integrated risk management solution covering three types of risks: Credit, market, and operational risks. The solution allows the computation of the capital adequacy ratio and the identification, measurement, mitigation of credit, market, and operational risks according to various methods as set in Basel II/III frameworks including: The standardized approach for credit, market, and operational risks, and it includes analysis techniques and simulations. This application enables the bank to set up parameters in order for the system to combine the different information and produce the reports required to be forwarded to the central bank and the bank’s management. Finally, these reports are of different formats: Tabular forms, graphical presentations and heat maps.
Among its many functionalities:
- Risk-weighted assets (RWAs) and regulatory capital requirements computation
- Basel III liquidity measures computation, which includes stock of high-quality liquid assets, liquidity coverage ratio (LCR), and net stable funding ratio (NSFR)
- Stress testing scenario building and analysis covering credit risk scenarios, profit rate shocks, foreign exchange risk shocks, and liquidity risk situations.
Operational Risk Management
This is a component to log, measure, and analyze operational risks that the financial institution faces, which includes multiple techniques to mitigate potential risks. The solution covers tools such as IMDC, RCSA, Risk Register and Business Continuity Management (BCM).
- Incident management and data collection or event transactions: A tool for the identification, collection, reporting, and management of operational risk loss incidents in the financial institution.
- Risk & control self-assessment (RCSA): A powerful tool that allows a financial institution to identify, assess, and mitigate potential key operational risk incidences that may occur. RCSA is highly parameterized and boasts several reports, tracking sheets, and heat maps.
- Risk register: A tool that groups together all the actual and potential risks of a financial institution to identify, analyze, and manage operational risks. Additional analysis can be run on the collected information, such as listing risks according to probability of occurrence or loss amounts.
- Key risk indicators (KRI) / Key control indicators (KCI): A very important tool that gives the financial institution a flexible platform to identify and map every risk to controls, along with thresholds and automated alerts that are sent when the threshold is exceeded.
- Business continuity management (BCM): A tool that provides a framework to ensure the resilience of the financial institution to any eventuality, to help ensure business continuity to customers and the protection of the financial institution’s reputation. This tool allows the user to document key elements of the BCM such as business impact analysis (BIA) exercises, initial damage assessment, and action log, among others.
Market Risk & ALM
This component would cater for analytical requirements relating to market risk and asset liability management (ALM) of the financial institution. The dashboards and reports will assist the financial institution in assessing the impact of changes in the market to make better decisions.
Among its many functionalities:
- Value at Risk (VaR) calculation for customized or trading book portfolio
- Valuation of portfolios through cash flow discounting methodologies
- Yield curve scenario analysis and computation of P&L under assumed yield curve shocks
- Hedge effectiveness testing
- Maturity mismatches and GAP analysis
- Computation of changes in net interest income or market value of equity through stress testing scenario analysis
- Deposits statistical & trend analysis.
Cash Flow Monitoring
Financial institutions that use a comprehensive Cash Flow Monitoring solution are able to reduce errors and increase the efficiency of the working capital. An effective solution would include consolidation of all cash inflows and outflows in a single view, and allowing trend analysis to monitor and track trends across the cash flow monitoring process, thus making it easier to spot costly obstacles.
Our new Cash Flow Monitoring system offers the right components to cover the necessary reporting and analysis of a robust correspondent banking liquidity management framework.
It comprises of a flexible architecture which would procure data from multiple sources including third party data such as SWIFT messages in XML format. It also provides financial institutions with reliable techniques that improve their cash monitoring in order to reduce their borrowing and the related costs; thus managing the overall liquidity risk and increasing business profitability.
With this solution, cash flow monitoring is progressively shifting from being reactive to becoming a proactive and predictive function to a near real-time, daily process for reduced risks and improved profitability.
Credit Risk & IFRS 9
The solution provides financial institutions with the required tools for forward-looking impairment modeling and credit risk management perspectives into accounting. The solution offers different methods for the quantification of expected credit losses (ECL), while being sufficiently flexible in assigning the bank’s exposures into different stages.
Moreover, the solution goes beyond compliance in providing internal credit ratings schemas for financial institutions, and improves business performance through guidance on risk of counterparties and exposures.
The solution is built to be fully integrated with third-party core banking systems with simplified data extraction methodologies through a data warehouse. Moreover, it ensures that users have access to an analysis and reporting platform that offers diverse analytical capabilities.
Among its many functionalities:
- Performs an end-to-end process of impairment calculations that includes collection and centralization of data from numerous sources into the data warehouse
- Provides dynamicity, accuracy, and integration capabilities for optimal compliance with the new IFRS 9 standard
- Applies rigorous models setup and maintains provision calculations according to the new IFRS 9 standard.
Financial Consolidation is a standalone solution that permits the combination and consolidation of financial statements of a group comprising a parent entity and its subsidiaries in order to be presented as a single economic entity.
This solution has parameters to setup the consolidation process, transactions for manual adjustment and changes in the ownership and controlling interest, and reports. It permits retrieving consolidated financials across multiple hierarchies and accounting standards.
Consolidation Group and Subgroups:
The solution uses step consolidation method by creating a separate subgroup for each hierarchy level. Once a subgroup has been consolidated, it becomes a consolidation unit when the next higher level is consolidated. This procedure is recurring until consolidation is carried out at the top level.
Step consolidation enables clarity information retention of the consolidation process, even when dealing with a complex group structure.
FATCA & CRS
This standalone solution combines key requirements for both the FATCA and the CRS compliance. This convenient and comprehensive tool involves IT, legal and front office with full coverage across the global financial markets:
- FATCA is designed to allow financial institutions comply with the international regulations of FATCA (Foreign Account Tax Compliance Act). It consists of three major phases that fall under identifying U.S. account holders, reporting to IRS (Internal Revenue Service), and processing penalty of withholding tax for recalcitrant account holders.
- CRS is a global tax framework for the automatic exchange of financial account information and disclosure of income earned by individuals and organizations, allowing tax authorities to obtain a clearer understanding of financial assets held abroad by their residents.