Optimisation of Risk Management
ICAAP (Internal Capital Adequacy Assessment Process) is a key element of the second pillar of Basel II, which stipulates that financial institutions must institute a process to constantly assess the capital requirements of the bank over and above the minimum requirements of Pillar I. Besides being a regulatory requirement, ICAAP is an opportunity for banks to improve risk management practices to ensure its returns are commensurate to the risks they face. That said, the non-prescriptive nature of Pillar II and ICAAP presents an enormous challenge for banks in instituting an ICAAP. With FlexFinance Analytix, FERNBACH provides a comprehensive solution to support banks in the Supervisory Review and Evaluation Process (SREP) and to aid a bank in instituting and maintaining its ICAAP.
Increasing Efficiency of risk and Economic Management on all Levels
FlexFinance Analytix is powered by a flexible and powerful analytics platform created by FERNBACH-Software. FlexFinance Analytix is a high performance modeling tool that scales to a wide range of applications and has been designed to empower business users with the ability to model a wide range of solutions. The FlexFinance Analytix platform enables a bank to map in a large variety of data sources and applications, which in turn enables a bank to leverage existing investments in IT infrastructure for risk including risk systems by third parties, data warehouses or marts, etc.
In FlexFinance Analytix, FERNBACH offers a central structure for data management with tailored calculations that allows financial institutions to not only aggregate information on risk, value and income, but also to create an enterprise-wide view of the bank's risk profile for daily monitoring leading to sustainable benefits in the area of risk identification, measurement and control. FlexFinance Analytix also includes a range of standard ‘off-the-shelf’ risk models that banks can use as they are or with modifications to suit their business. These ‘off-the-shelf’ models are built on industry-accepted methodologies and also serve as a good starting point for a bank that wants to develop more complex models from standard methodologies over time. The models in FlexFinance Analytix cover a variety of risk types or applications.
Establishing and developing a secure and stable risk infrastructure
From a regulatory standpoint, a key aspect of ICAAP is stress testing, where the bank needs to understand for itself and prove to the regulator that it is adequately capitalized for adverse economic conditions. Ad hoc reports for analysis and individual what-if scenarios based on freely definable portfolios can be generated using FlexFinance Analytix, where scenarios as well as portfolios can be defined using either an intuitive wizard function or a high-performance script language.
High performance, flexible aggregation and modeling platform
Besides the regulatory models prescribed by the regulator to estimating a bank’s capital requirement, it is good practice for banks to employ its own economic capital models to estimate the capital required to cover risks they are exposed to based on their own understanding of their business. While economic capital is the metric that a bank would like to base its business decisions on, it cannot entirely replace regulatory capital, which means that a bank will need to calculate both its regulatory and economic capital requirements in parallel. FlexFinance Analytix helps calculate and compare both regulatory and economic capital requirements.
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