Macroeconomic Modelling and Validation

Global economy has been experiencing a sharp transformation at least for the last decade. Broadly speaking, macroeconomic modelling can be used for to understand the past and present, to predict (forecast) the future and to test alternative futures.

Organizations have begun to adopt a wide array of risk models and simulations to start addressing strategic, operational, compliance, geopolitical, and other types of risk. Wider availability of data and sophisticated analysis capabilities is making modeling more practical. At the same time, the need to cope with an increasingly risky environment is making it more valued.

Macroeconomic models are developed with the aim to answer key questions of the scenario analysis for banks, that are:

• How will the banking landscape change in future as a result of regulatory and macroeconomic influences?

• What are the possible effects on the viability and sustainability of bank's business models?

How Deloitte can help?

We help clients to shape their decisions by evaluating the possible impacts of macroeconomic developments and to incorporate Forward Looking (“FL”) approach into the modeling of the risk parameters.

Deloitte can help you through:

  1. Inclusion of Macroeconomic factors in common Credit Risk models development and Validation of those Macroeconomic factors already incorporated in existing credit risk models.
  2. Inclusion of Macroeconomic factors in common Risk Systems.
  3. Econometric modeling of the portfolio and business parameters (Default Rate, Expected Capital Loss, relation to the macroeconomic factors.
  4. Stress Test Methodology and Implementation.
  5. Climate Stress Test Methodology and Implementation.