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Advanced credit risk rating platform

A launch pad for better risk management

With the rapid evolution of the US banking regulatory and market landscapes, risk rating processes have become increasingly critical. Banks are under pressure to churn out models at a faster pace while ensuring that associated model risks are managed effectively. Rating processes based on spreadsheets or fragmented technology are increasingly being replaced by advanced credit risk rating platforms (RRP) as banks strive to remain competitive in the marketplace and comply with regulatory expectations.

A new approach

Once a siloed activity, risk rating now occupies center stage in almost every aspect of a bank’s day-to-day operations. This increased focus on the models underlying risk rating is due to several factors, including:

  • Regulations: New regulations have resulted in the need for a larger inventory and have increased overall model complexity, placing a greater focus on ongoing model accuracy.
  • Market conditions: Challenging US market conditions, including low interest rates, are driving institutions to revise underwriting models and adopt superior technologies to facilitate efficient model rollout.
  • Competition: Frequent changes to bank portfolios as a result of product innovation or the acquisition of selected portfolios mean new risk models need to be rapidly developed and deployed.
  • Advanced analytics: The emphasis on more sophisticated internal reporting and analytics is driving a need for more robust risk rating data infrastructure, integration, traceability, and model inventory management.
  • Oversight and governance: The increased responsibility placed on banks’ senior management and boards to provide the appropriate level of governance and oversight across capital planning and risk management processes is driving the need for robust risk rating model execution with built-in control mechanisms.

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An advanced platform emerges

The advanced risk rating platform represents a paradigm shift from conventional approaches to credit risk rating enablement. It has several dynamic new features that can help holistically address the demands of a diverse set of stakeholders, including self-service, advanced technologies, and upstream and downstream data integration.

The RRP also orchestrates the harmonization of technology components, data flows, and business processes to help address these diverse needs across the model lifecycle.

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Elevate your risk management

The significance of a fully functional RRP lies in its deep impact on various critical enterprise risk management processes, including the underwriting process, capital allocation, and regulatory reporting. The implementation of an advanced commercial credit risk rating platform makes strategic sense given that it can upscale the risk management framework of commercial banks to the next level of maturity and provide a vital competitive advantage in the current market.

Benefits include:

  • Reduced time to market for credit risk models through streamlined implementation and deployment processes.
  • Incorporated best practices in model development, including support for sensitivity analysis, enhanced model monitoring, benchmarking, and analytical reporting.
  • Seamless integration across business processes and systems.
  • Centralized model inventory with robust version control and change management capabilities.
  • Improvements in risk rating process efficiency and user friendliness.

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