Financial, Capital Management Accounting and Valuation

Governance, Risk and Regulatory Services

Stakeholder expectations and regulatory environment for corporates and financial institutions have evolved significantly in recent years and, coupled with uncertain business conditions, have resulted in increased pressures on the Board of Directors and senior management. Companies today are under sustained pressure to demonstrate above average earnings, while simultaneously maintaining strong oversight and controls over the risks to which it is exposed. At the same time, regulations have become staggeringly complex, demanding significantly more granular data, increased efficacy in audit & compliance functions and advanced risk modeling techniques.

These forces have created an unprecedented need for a robust risk and performance management mechanism, which aligns the corporate goals and return on equity objectives with regulatory expectations around compliance, audit and financial risk management. We bring together our extensive experience in risk management, regulation, technology, quantitative advisory and operations to help organizations address these challenges and opportunities in an integrated, focused and cost effective manner.

Valuation of financial instruments

  • Development and validation of valuation models for derivatives and financial instruments
  • Compliance of valuation models with FAS 157 & IFRS 13
  • Financial modeling assistance and other consultative valuation services
  • Impairment testing of financial assets in line with IFRS 9

Economic Capital Framework

  • Develop the economic capital framework for a financial institution
  • Implementation of risk-return models and capital planning and allocation framework

Capital planning and budgeting

  • Develop multi-year capital planning and budgeting models to facilitate identification of potential shortfalls, incorporating stress testing and scenario analysis as part of capital planning models
  • Develop capital management policies, establishing prudent guidelines for capital planning & budgeting, dividend payout & contingency plans for capital issuance
  • Review of system automation for capital planning and validation of assumptions & factors configured in system

Capital allocation and optimization

  • Develop / validate capital computation models, covering Basel III Pillar 1 and Pillar 2 risks and evaluate appropriateness of assumptions & computational accuracy of models
  • Develop / validate credit risk management models, including credit rating & scoring models as well as IRB estimation models (PD, LGD, EAD etc.)
  • Develop / validate market risk models, including models for MTM valuation models, market risk metrics (PV01, NOOP, Greeks etc.), Value at Risk, back-testing, expected shortfall and counterparty credit risk
  • Develop / validate operational risk management models including loss database management and Operational VaR models under AMA
  • Develop / validate liquidity risk management models covering regulatory reporting and Basel IIII LCR / NSFR models
  • Validate ICAAP program and associated risk quantification and stress testing methodologies
  • Develop capital optimization strategies employing portfolio rebalancing, securitization and group structure related considerations
  • Determine the optimum capital mix (i.e. capital instruments of each type), considering eligibility under Basel III and capital forecasts developed

Performance Management and Risk based pricing

  • Define governance mechanism and policies for liquidity risk management, asset liability management and fund transfer pricing
  • Develop behavioral models for generating cash flow profiles for products with indeterminate cash flows / embedded options
  • Develop models for cash flow forecasts of contractual positions and dynamic forecasts considering new business growth
  • Establish interest rate risk models for computing Duration Gap, Market Value of Equity and Net Interest Income simulations
  • Develop intraday liquidity management policies and models for intraday liquidity forecasting & monitoring
  • Develop models for Basel III liquidity risk metrics, viz. LCR, NSFR and Leverage Ratios
  • Develop fund transfer pricing (‘FTP’) models for assigning rates to assets and liabilities
  • Design risk adjusted fund transfer pricing models incorporating risk premiums to facilitate calculation of risk adjusted profitability at a product / business unit level
  • Define reporting framework for product / BU profitability, and associated monitoring requirements
  • Conduct model validation for all balance sheet management models, including liquidity risk, ALM, IRRBB and FTP models
  • Define functional requirements for automating performance management framework
  • Assist in system selection, implementation and program management

Risk based evaluation of financial instruments

  • Review of new product/ instruments from a risk perspective prior to launch
  • Product specific risk evaluation to assess coverage, quantification and pricing of Pillar I and Pillar II risks
  • Ad-hoc assistance relating to launch of new instruments/ products

Hedge accounting and effectiveness testing

  • Develop hedge accounting framework and documentation under FAS-133, IAS-39, IFRS-9 and AS-30
  • Develop hedge accounting strategies and associated documentation
  • Prepare and review hedge accounting framework and documentation
  • Review hedge accounting framework and documentation
  • Develop / validate hedge effectiveness testing framework

Regulatory compliance strategies

  • Strengthen compliance function in financial institutions
  • End-to-end assistance to banks and financial institutions in meeting compliance requirements risk based supervision (RBS / SPARC) framework
  • Repository of compliance requirements, including all applicable laws
  • Compliance testing and continuous control monitoring
  • Basel II implementation and transition to advanced approaches

Treasury, trade and transactions

  • Global markets revenue enhancement and integration with trade business
  • Develop client segmentation models for estimating segment-wise revenue potential
  • Develop analytical models, based on sector and risk exposures, to develop right product structures for offering to the client
  • Undertake risk profiling of Treasury products
  • Design risk management, financial accounting and control systems for structured products
  • Development of customer suitability and appropriateness frameworks for treasury products
  • Develop cross-sell models to identify additional products which can be positioned to the customer
  • Re-engineering/ enhancing treasury operations
  • Define robust set of KPIs to report client/ product/ geography activity and drive performance assessment
  • Establish early warning indicators and triggers to highlight potential dealer misconduct and excessive risk taking
  • Determine appropriate type of cash pooling to be combined with an effective tax structure and assist in implementation of the cash pooling methodology