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Banking Sector Risk Consulting
2PKC Advisory
PKC Advisory – An Overview
3PKC Advisory
PKC Advisory – Differentiated Value Proposition
Incepted in Kuwait and focused on the MENA region, we offer a breadth of
regional experience. We have executed 700+ assignments for 100+
clients in the region
Regional
Experience
Having worked with numerous clients across sectors, we offer a depth of
operational expertise. Our long term engagement model ensures that we
are part of client teams and support them in implementation and execution
Deep Operational
Expertise
Our advisory services are focused on helping clients make informed
decisions and perform better through people, process and
procurement related improvements. We also provide innovative solutions
with our alliance partners
Complementary
Service Offerings
Our service offerings and deliverables are tailor made to meet the specific
needs of individual clients. We work collaboratively and enhance client
capabilities through effective knowledge transfer
Customized
Approach
Our robust governance, standardized procedures and control mechanisms
lead to increased efficiency and ensure delivery of the highest quality
with utmost speed to our clients
Robust Governance
& Controls
Our unique onsite-offsite model, allows us to hire the best talent from
globally recognized institutions and organizations, offer offsite execution
prowess and pass on the cost arbitrage and productivity gains to our clients
Competitive
Positioning
Banking
Sector Risk
& Control
Service
Offerings
5PKC Advisory
Banking Sector Risk & Control Service Offerings
1. Risk Appetite Framework
2. RAROC Framework
3. ICAAP & Stress Testing Framework
4. Early Warning Indicator Framework
5. Scenario Analysis & Modeling
1. Preparation of Management Reports & Board
Risk Packs
2. Credit Analysis & Appraisal (incl. Credit Memos
and Moody’s Risk Analyst Spreading)
3. Regulatory Reporting & Impact Assessment
4. Automated & Interactive Management
Dashboards through Business Intelligence Tools
A. RISK IDENTIFICATION,
ASSESSMENT & MEASUREMENT
B. RISK MONITORING &
REPORTING
1. PD, LGD, EAD Model Development
2. Development of Credit Scoring Models
3. Regulatory Analytics including IFRS 9 and BASEL
Models
4. Gap Analysis, Calibration and Validation of
existing Models
5. Documentation Support
1. Enterprise Risk Management (ERM)
2. Risk & Control Self-Assessment (RCSA)
3. Development and Review of Key Risk Indicators
(KRIs)
4. Development and Benchmarking of Policies &
Procedures
5. Testing of Controls for Design and Effectiveness
C. RISK MODELING & ANALYTICS D. RISK & CONTROL SOLUTIONS
6PKC Advisory
Determination of Risk Appetite
in-line with Global Best
Practices
Risk Appetite Framework
▪ Internal
− Bank’s Positioning
& Business Model
− Risk Identification &
Assessment
− Risk Register
▪ External
− Macroeconomic
Outlook
− Shareholders’
Expectations
− Rating Agency
Expectations
− Central Bank
Requirements
− Peer Benchmarks
Assessment of
Internal/External
Drivers
Risk Preferences, e.g.“Lending is at the core of
our business model. We continue to be
selective in our credit decisions with emphasis
on credit quality”
Risk Appetite Tolerance Statements and
Metrics, e.g."Average costs of credit in the
lending book should not exceed X%"
Limits Framework, e.g. "Average costs of
credit for portfolio X should not exceed Y% "
Defining Risk Appetite Statements,
Metrics, Limits
Revision of Management/Board Risk
Dashboard to incorporate Risk
Appetite, including key Trigger Points
Development of
Governance Manual
Breach Escalation and
Mitigation Plans
Annual /Periodic Review
Process for incorporation of
Risk Appetite into Strategic
Planning/Budgeting Process
Roles & Responsibilities of
Internal Stakeholders
Risk Appetite Framework Development Approach
Process for incorporation into
Strategic Planning/Budgeting
Process
1 2 3
A comprehensive Risk Appetite Framework has proven to be a key instrument in defining the operational boundaries for Banks
which helps to align their strategy, capital allocation, and risks. PKC Advisory helps its clients in development of a robust Risk
Appetite Framework in-line with the global best practices. The various components of a typical Risk Appetite Framework
development assignment are :
RISK IDENTIFICATION, ASSESSMENT & MEASUREMENT
7PKC Advisory
RAROC Framework
We, at PKC Advisory, support our clients in development of complete RAROC Framework in-line with Industry best practices.
Key components of PKC Advisory’s engagement are depicted below.
Key Benefits
Comparison of Profitability
across BUs, RMs, Branches
Risk Adjusted Loan Pricing
Loan Structuring (e.g.
Collateral Coverage)
Accept/Reject a Proposal
RWA Optimization
▪ Defining RAROC
Calculation
factoring in
Revenues, Costs,
ELs, RWA etc.
▪ Defining
Methodology to
ascertain Hurdle
Rates at
Bankwide, BU or
Customer level
▪ Development of
RAROC Reports at
Bankwide / BU /
Branches / RMs /
Customers
▪ Devising Customer
Level RAROC
Calculator
▪ Incorporation of
RAROC Targets in
Strategic Planning
Process
▪ Clearly Defined
Guidelines for
Hurdle rate
Calculations,
Reporting,
Proposal
Evaluation etc.
▪ Roles &
Responsibilities of
Various
Stakeholders
▪ Preparation of Initial
RAROC Reports
▪ Training and
Handover to Internal
Team
▪ Roadmap /Support
for further
embedding into
Performance
Management &
Policies
1 2 3 4
Overhead Expected Loss
Regulatory Minimum CapitalNet Income
RAROC
Asset & Liability
Spread
Post financial crisis, the importance of efficient capital management & conservation has increased manifold. As a result, Banks
and Financial Institutions globally are increasingly using risk-sensitive measures & frameworks to maximize shareholders’ value
and optimize capital usage. Risk Adjusted Return on Capital (RAROC) is accepted globally as a unique risk adjusted profitability
measure for capital management as it integrates Revenues, Costs, Expected Losses (EL) and Risk Weighted Assets (RWA).
PD, LGD, EADCost AllocationThird Party rate &
FTP
Taxes
Hurdle Rate
Economic Value Added (EVA)
Fee Income
Development of
Policies & Procedures
Implementation
Support
Devising ToolsDetermination of
Measurement
Methodology
RISK IDENTIFICATION, ASSESSMENT & MEASUREMENT
8PKC Advisory
ICAAP and Stress Testing Framework
Assessment of Material Risks
▪ Study of Bank’s Business Model
▪ Identification of Material Risks
Development of
Measurement Approach
▪ Study of available Data
▪ Ascertaining
Computational Approach
Measurement of Stress Variables
▪ Ascertaining Mild, Medium and Severe
Stress Scenarios
▪ Determining Stressed Values
Risk Modeling
▪ Development of detailed Model
▪ Calculation of Base and Scenarios Results
▪ Submission to Management & Regulator
Development of Governance
Framework
▪ Roles & Responsibilities
▪ Risk Materiality Assessment
▪ High Level Mitigation Plan
▪ Independent Review
▪ Monitoring & Reporting
Regulatory Reporting Support
▪ ICAAP & Stress Testing Document
▪ Management Dashboard
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A Bank must have an Internal Capital Adequacy Assessment Process (ICAAP) and Stress Testing Framework for development
of a robust risk and capital management process. This Framework helps the Banks in determining an appropriate level of
capitalization over the minimum regulatory capital under various stress scenarios. It is based on their respective business
models and risk profiles.
We at PKC Advisory offer customized and integrated solutions to develop robust ICAAP and Stress Testing Framework which
ensures that the Bank possesses sufficient internal capital for meeting various risks. Key components of our service offerings
include –
RISK IDENTIFICATION, ASSESSMENT & MEASUREMENT
9PKC Advisory
Evaluation of Behavioral and Transactional customer level data
available through Core-Banking and other systems
Complex Statistical Modeling to identify significant variables and analysis
Development of scorecard to identify vulnerable customers
Preparation of automated Dashboard Toolkit for proactive monitoring
Roadmap to enhance Application Models
Assessment of the Bank’s Business & Financial Position and geographical
location
Ascertaining Bank and Business Unit specific leading risk indicators across
Risk Dimension
Benchmarking of identified indicators
Development of content rich Management Dashboard
Implementation support in terms of manual development, handover etc.
Bankwide and
Portfolio Level
Indicators
Customer Level
Indicators
Early Warning Indicators Framework
Development
of Early
Warning
Framework
The credit and investment losses for Banks across the world increased multiple times after the financial crisis. As a result of that,
Board Risk Committee, Management, Rating Agencies and Regulators are increasingly focusing on the Bank’s ability to predict
potential losses due to global & regional macro-economic/ sectoral trends and customer centric characteristics.
At PKC Advisory, we have the required key skills and competencies needed to identify, evaluate and measure Early Warning
Indicators (EWI) and develop a robust and sophisticated framework to help initiate preventive measures timely and minimize the
potential losses.
RISK IDENTIFICATION, ASSESSMENT & MEASUREMENT
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Scenario Analysis & Modeling
PKC Advisory, helps its clients to meet these emerging challenges by developing a flexible, consistent and robust framework for
scenario planning. Key components of such framework in depicted below:
Why Scenario Planning?
▪ Heightened regulatory scrutiny – which is likely to escalate further
▪ Management focus to develop additional broad-based stress-testing capabilities
▪ Need for evaluation of core capitalization, funding & liquidity risks sensitivities
▪ New accounting, capital and data requirements
Modelling the Impact
Application of Output
Scenario Analysis and Modeling
AnalyticsInputs
Draw a Coherent & Plausible
Theme based on Expected
Evolution of Events
Develop
Scenarios
Identify key Variables; Gauge their
Interdependence & Impact on
Bank’s Cash Flows
Selecting
Key
Variable
Determine Impact on P&L, Balance
Sheet & Critical Regulatory Ratios
Develop
Analytical
Engine
Review Model Governance, Theory
& Techniques, Key Assumptions,
Data Integrity etc.
Validate
the
Models
Defining Parameters
Economic Activities:
▪ Macro Economic Possibilities
▪ Economic “Shock” Impacts
External Changes:
▪ Regulatory Initiatives
▪ Market Dynamics
Market Events :
▪ Key Markets/Sector Slowdown
▪ Volatility in Specific Areas
Internal Sensitivities:
▪ Known Concentrations & Issues
▪ One-off Events
▪ Ensuring Appropriate Capital Levels
▪ Facilitating Capital Allocation
▪ Linkage of LRP & Budget for Proactive Decision Making
▪ Ensuring all Regulatory Requirement Met
▪ Input to Risk Appetite Dashboard and Limit Setting
▪ Reporting of Output to External & Internal Stakeholders
Capital
Management
Strategic
Planning
Regulatory
Compliance
Risk
Appetite
Reporting
RISK IDENTIFICATION, ASSESSMENT & MEASUREMENT
11PKC Advisory
Preparation of Management Reports & Board Risk Packs
Risk Reporting Packs often lack objective information and conclusions leading to delayed decision making and escalation of
risks. We at PKC Advisory assist in appropriate structuring of Risk Packs to clearly depict the big picture by capturing all top and
emerging risks upfront. With this, Board and Management can save the time spent in wading through unnecessary details and
systematically focus on critical information and core risks.
Additionally, PKC Advisory can set up a dedicated offshore team to support in preparation of comprehensive Risk Information
pack covering all risk dimensions across Credit, Market, Liquidity, Capital, Operation, Information Security, Anti-money
laundering etc.
Below are the key components of PKC Advisory’s service offering -
▪ Assessment of existing Risk Reporting
Packs
▪ Understanding expectations and pain
points of Stakeholders
▪ Development of Structure and Templates
covering below aspects
- Key Conclusions and Emerging Risks
- Top & Accepted Risks
- Stress Test Results, Risk Appetite
- Review of each Risk Function
▪ Preparation of revised Risk packs
▪ Preparation of Process Mapping and
Responsibilities Matrix
Comprehensive Risk Information Pack
covering below mentioned aspects –
- Detailed KPIs and Commentary
across Credit, Market, Liquidity,
Capital, Operation, Information
Security, Anti-money laundering etc.
- Details pertaining to key Early
Warning Indicators
- Risk Appetite Reports including
Breach and Potential Remedial
Actions
- Scenario Analysis / Stress Testing
Reports
- Risk Adjusted Return On Capital
(RAROC) & Economic Value Added
(EVA) Reports
Enhancement of Management Reports
& Board Risk PacksPreparation of Periodic Reports with
Dedicated Offshore Team
RISK MONITORING & REPORTING
12PKC Advisory
▪ Detailed evaluation of existing memos
▪ Benchmarking with best industry
practices
▪ Recommending key Structural, Content
and Analysis related Improvements
▪ Preparation of Sample Memos based on
recommended approach
▪ Development of user guide covering
details pertaining to each section of
Memo & MRA Spreading
▪ Conduct Onsite Training Sessions for
RMs / Financial Analysis Unit or through
Online Modules
Credit Analysis and Appraisal
▪ Update of Memos for renewal or increase
in credit facilities for existing customers
▪ Memos for prospective customers
▪ Update of Financial and Non-Financial
information in MRA
▪ Update in MRA (Quarterly / Half yearly
Financials)
▪ Update of Qualitative details including
Financials, Management, Company
Standing, Industry Risk etc.
▪ Update on significant developments
Training of
Bank Staff
Regular Credit
Monitoring
of Customers
Preparation of
Memos with
Dedicated
Offshore Team
Enhancement
of
Credit Memos
As Credit risk forms the biggest risk in a banking book, effectiveness of Credit risk identification capabilities of the Management
are often judged with robustness of Credit appraisal process of the bank. We at PKC Advisory assist our clients by setting-up a
dedicated offshore team to prepare Credit Assessment Memos in-line with Industry best practice and financial spreads in
Moody’s Risk Analyst (MRA) system.
Key components of our service offerings include:-
RISK MONITORING & REPORTING
13PKC Advisory
Regulatory Reporting and Impact Assessment
Ever increasing capital adequacy and liquidity requirements have forced Banks to reassess their business model and optimize
capital and funding levels. We at PKC Advisory assists our clients with a detailed impact analysis and implementation support for
stringent capital & liquidity regulations. Additionally, PKC Advisory can set up a dedicated offshore team to support in periodic
preparation of regulatory reports.
The various components of our Regulatory Reporting and Impact Assessment services are depicted below:
Impact Assessment &
Action Plan for New
Regulations
Periodic Preparation of
Regulatory Reports
through a Dedicated
Offshore Team
Implementation Support for
Revised Reporting Framework
▪ Review of Regulatory
Guidelines including
Capital and Liquidity
Requirements
▪ Capital & Funding
Planning and action
plan for in-eligible
instruments
▪ Devising Capital &
Funding optimization
and rationalization
strategy
▪ Development/Preparation of regulatory
reporting kit
▪ Implementation of automation
measures for periodic reporting
▪ Preparation of periodic
regulatory reports including
- Capital Adequacy
Reports
- Liquidity Coverage Ratio
(LCR) & Net Stable
Funding Ratio (NSFR)
Reports
- ICAAP & Stress testing
Reports
- Concentration Reports
- Investment, Fx and
Derivative Reports
- Funding reports etc.
RISK MONITORING & REPORTING
14PKC Advisory
Automated & Interactive Management Dashboards
▪ Unstructured /
Unconsolidated
Information
▪ Manual
interventions
▪ Lack of
systematic
approach for
periodic
reporting
▪ Siloed
approach
▪ Lack of
Integration with
Data Source
What May Be
Your
Challenges
How We Can Help
I
▪ Understanding Business Context and
related aspects
▪ Gathering available Information
▪ Identify key Emerging, Forward looking
and Historical Risk Indicators
Identifying Key
Risk Indicators &
Information
Gathering
II
▪ Understanding current / required
Information Technology Infrastructure to
implement BI tool
▪ Developing Data Architecture
▪ Designing ETL (Extract, Transform and
Load) Process for Data Modeling
Developing Data
Architecture
III
▪ Preparation of Interactive Dashboards
with Content Rich Visualization incl.
Charts / Tables / Graphs / Maps etc.
▪ Seamless Integration of Dashboard with
Data Source
Designing
Dashboard Toolkit
IVImplementation
Support
▪ Handhold the team through one cycle of
preparation
▪ Development of Business Requirement
Document (BRD) for further automation
▪ Complete
Integration with
Data Source
▪ Availability of
Risk Insights at
a Click of a
Button
▪ Fully
Automated &
Interactive Risk
Dashboards
▪ Ease of report
generation
from
Dashboards
▪ User manuals
for periodic
updates
▪ BRD for further
automation
What are the
Value Adds
Risk department in the MENA region often lack systematic and integrated risk reporting resulting in irregular reporting of core
and emerging risks to the management. This further leads to delayed decision making which might have a dire consequences.
PKC Advisory assists its clients in development and operationalization of fully integrated interactive and visual dashboards
based on application based Business Intelligence (BI) tools. These dashboards help senior risk management to identify,
measure, and analyse key risks and thereby facilitate timely decision making.
RISK MONITORING & REPORTING
15PKC Advisory
Risk Modeling and Analytics
Regulatory changes and emerging risk dimensions have enhanced the requirements for Risk Modelling and Analytics for Banks.
PKC Advisory works with its clients to develop a effective and integrated risk management framework which can help
determine the portfolio at risk through predictive and prescriptive analysis. The various components of our Risk Modeling and
Analytics services are depicted below:
RISK MODELING & ANALYTICS
▪ Acquisition/Applications
Scorecards
▪ Behavior/Accounts
Management Scorecards
▪ Collections & Fraud Models
▪ IFRS 9/CECL Development
▪ PD, LGD & EAD Models
▪ Fraud analysis
Core Model
Development
Model
Validation
Model
Monitoring &
Annual Reviews
Model Risk
Governance
▪ Out of Time/ Out of Sample
Validations
▪ K fold Cross-
Validation/Bootstrapping
▪ Back Testing
▪ Documentation and
Submission
▪ Quarterly Model Monitoring
▪ Monthly Data Risk/ Early
Warning Indicators reports
▪ Annual Reviews of Models
▪ Analysis of Model
Performance
▪ Governance program
development
▪ Process Design as per
Governance rules
▪ Risk Ranking of Models
▪ Development, Validation &
Execution of Governance
Framework
Approach
▪ Data Mapping
▪ Variable Selection
▪ Model Development
Development
▪ Generating insights
▪ Finding areas of improvement
▪ Recommendations
▪ Quarterly Model review
▪ Performance tracking
▪ Governance submission
Validation
▪ Cross Validation
▪ Model Comparison
▪ Calibration
Monitoring & Annual
Reviews
Insights &
Recommendations
Service Offerings
16PKC Advisory
Enterprise Risk Management
Our Approach towards Developing and Implementing a Robust ERM Framework
Stages Focus Areas
Establishing Governance, Culture and Structure
▪ Document the Risk Strategy and Risk Appetite of the Entity
▪ Develop the ERM Program, ERM Charter and Risk Governance Structure
▪ Educate the key stakeholders on ERM Concepts and Methodologies
Identifying and Analyzing Risks
▪ Create a comprehensive Risk Universe by identifying the inherent risks prevailing across the entity
▪ Perform Risk Analysis, Evaluation and Prioritization for the identified risks
Risk Response Planning and Plotting Pertinent
Controls
▪ Plan appropriate risk responses - Avoiding, Sharing, Accepting, or Mitigating the Risks
▪ Establish and Plot appropriate controls for the Identified risks with clearly stated roles and
responsibilities
▪ Assess the residual risks after establishing the controls
Monitoring and Continuous Improvement
▪ Continuous Monitoring and Assessment of key Risks and Controls
▪ Periodic Evaluation and Updation of the ERM Framework basis the Entity’s Maturity Levels
Enterprise Risk Management (ERM) is a mechanism designed to identify, assess and prepare an entity against potential risk
events that may adversely impact the Strategic, Operational, Reporting, and Compliance objectives of an entity.
PKC Advisory assists its Banking sector clients in their endeavour for Enterprise-wide Risk Management by designing and
implementing the COSO Framework for effectively managing their enterprise-wide risks. It also provides them with a mechanism
to facilitate appropriate and timely monitoring and reporting of risks across its levels.
RISK & CONTROL SOLUTIONS
17PKC Advisory
Risk & Control Self-AssessmentO
ur
Ap
pro
ac
h
Determine Risk Tolerance and Likelihood
Determine and agree on Client’s Risk Appetite, Risk
Tolerance Levels, Risk Likelihood and Impact Scales
Risk Identification
Identify and document operational Risks
related to processes of each function
Inherent Risk Assessment
Hold Workshops with the Risk owners and
assess the likelihood and impact of the
identified inherent Risks
RCSA Scoping
Review Function-wise existing Policies/ Procedures/
Products/ Services and document the key processes
Control Identification and Assessment
Identify, assess and document the design and operating effectiveness
of individual controls for each Identified Risk
Residual Risk Assessment
Assess the Residual Risk based on initial
assessment of inherent risk and effectiveness
of the associated controls
Mitigating Action Plans
Determine and document the
mitigating actions for high impact
residual Risks
1 2 5 63 74
Risk & Control Self-Assessment (RCSA) is a proactive tool for operational risk management that enables businesses to identify
and assess risks and their associated controls through a RCSA Framework.
PKC Advisory assists its banking sector clients in development and implementation of an effective entity-wide RCSA framework,
empowering managers to assume greater responsibility in monitoring their risks and associated controls, and effectively
escalating key risk issues to senior management.
RISK & CONTROL SOLUTIONS
18PKC Advisory
Key Risk Indicators
Conduct Workshops/
Interviews with
Business Units
Track KRIs
and Report Instances
of Breaches
Set Tolerance
Levels for the
Identified KRIs
Identify the KRIs
basis Process
Understanding
Establish Risk Mitigation
Plans to Address KRI
Breaches
Add/ Strengthen the
Controls to Address
the Issues
Understand the
Client’s Business
and Processes
Re-assess the KRI
Inventory on a Regular
basis
Better Outlook of the
Company’s Risk
Position
Increased
Awareness of Risks
and Controls
Prompt Risk
Mitigation
Key Benefits
Quantified and
Predictive Risk
Signals
Timely Monitoring
of Risks
Key Risk Indicators (KRIs) can be broadly defined as the metrics used by organizations to provide an early warning signal of
increasing risk exposures across the entity’s business.
PKC Advisory assists its clients in design and implementation of an optimum KRI framework, thereby empowering the risk
managers to monitor the entity’s risks more efficiently and take timely and effective risk mitigation steps.
Our Approach in Building a Strong and Comprehensive KRI Framework
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5
6
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8
RISK & CONTROL SOLUTIONS
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Development and Benchmarking of Policies and Procedures
Key Considerations
Understanding 'As-Is’
Policies/ Processes and
Reviewing 'As-Is’
Documentation
Stage - 1
Mapping ‘As-Is’ Policies
and Processes with
Regulatory Requirements
and Leading Practices
Stage - 2
Developing 'To-Be’ Policy
Guidelines and SOPs with
Key Considerations
Stage - 3
▪ Policies and processes aligned with leading practices and regulatory requirements
▪ Standardized activities with clearly stated roles and responsibilities
▪ Streamlined processes with specified timelines for performance of activities, wherever applicable
▪ Well-defined documents and inter-departmental/ system interfaces for activities
▪ Enhanced process efficiency and accountability through adequate control mechanisms
▪ Appropriate change mechanism in place with scalable and easy to implement processes
The growing need for streamlining and standardizing functions and processes has led organizations to develop Policies and
Procedure documents to achieve the primary objectives relating to Quality, Cost and Delivery along with compliance to
increasingly complex regulatory requirements.
PKC Advisory helps its banking sector clients in developing Policy documents and Standard Operating Procedures (SOP)
manuals for various functions and processes. PKC Advisory also assists in undertaking benchmarking/ gap analysis of existing
policies and procedures vis-à-vis industry best practices and regulatory requirements.
RISK & CONTROL SOLUTIONS
20PKC Advisory
Testing of Controls for Design and Effectiveness
Our Approach - Test of Design
➢ Ascertain the Risk of
Inefficacy of Controls and
Mark the same as either
“Higher” or “not Higher”
➢ Design Substantive Tests
with Optimum Sample Size
for Testing the Controls, with
greater emphasis on
“Higher” Risk-rated Controls
➢ Conduct detailed Inquiry of
the Persons Responsible for
Control Performance
➢ Perform detailed Inspection
of the Reports/ Documents
from the selected Samples
➢ Determine the Nature and
Cause of the Deviations and
Report the Control
Deficiencies to the
Management for undertaking
Remedial Actions
Assess the Risk
Associated with the
Controls
Plan the Nature, Timing,
and Extent of Tests
Perform Tests of
Operating Effectiveness
Conclude on the
Operating
Effectiveness
1 2 3 4
▪ Understand the Processes
& Activities
▪ Review the Risk and
Control Register to identify
key Risks and Controls
▪ Reconcile Control
Activities specified in the
Register with the Entity’s
Policies and Procedures
for comprehensiveness
▪ Document the Controls with
Design Deficiencies and
Report the same to the
Management for undertaking
Remedial Actions
▪ Trace End-to-End
Transaction of the Control
Activity to ensure
Existence of Controls
Understand the
Processes and Identify
Key Controls
Assess Quality
and Sufficiency
of the Register
Perform End-to-
End Walk-Through of
the Control Activity
Highlight Critical
Design Deficiencies
to the Management
Control testing refer to the procedures directed towards evaluation of the effectiveness of the design and implementation of the
internal controls established by an entity for mitigating the risks associated with its business. PKC Advisory employs a
comprehensive approach to assist its banking sector clients in identification and testing of enterprise-wide controls, thereby
giving a comfort to the management on the efficacy of controls in mitigating the associated risks.
Our Approach - Test of Operating Effectiveness
RISK & CONTROL SOLUTIONS
21PKC Advisory
Case Studies
22PKC Advisory
Development of Risk Appetite Framework Sample Extract
THE BUSINESS SITUATION
The Bank required assistance in development of risk
appetite framework at bank holding company level and
further cascading it down to its subsidiaries and
business units.
OUR ROLE
PKC Advisory undertook gap analysis of existing risk
appetite principles & processes considering the
strategic objectives & regulatory environment. The
revised framework included:
▪ High-level risk preference & statements while
addressing all major risks across risk dimensions
▪ Defined KPIs against each risk statement along with
tolerance ranges based on historical analysis, peer
benchmarking and board & management guidance
▪ Cascading of risk appetite and tolerance ranges to
each subsidiary & business unit with limits and
targets
▪ Embedding risk appetite framework in strategic
planning, management dashboards, risk information
packs etc.
OUR VALUE ADD
The framework enabled the Bank to clearly define the
risk tolerance ranges. It also acted as a foundation for
effective communication with internal & external
stakeholders
Case Study – Risk Appetite Framework
23PKC Advisory
Preparation of Credit Application Memos Sample Extract
THE BUSINESS SITUATION
The Client required assistance in preparation of
comprehensive credit application memos for
prospective and existing clients.
OUR ROLE
PKC Advisory undertook a detailed credit appraisal of
the Bank’s new and existing clients using standardized
credit assessment template. Our role included:
▪ Preparation of detailed obligor profile comprising of
management credentials, group structure, business
model, SWOT analysis, corporate governance
measures, recent development etc.
▪ Detailed historical financial & operational
performance analysis and assessment of financial
statement quality.
▪ Critical evaluation of management’s business plan
including development of adjusted scenarios.
▪ Comprehensive macro-economic, social, industry
trend analysis
▪ Input of qualitative and quantitative details in
Moody’s Risk Analyst (MRA)
▪ Detailed coverage of risks and mitigants.
OUR VALUE ADD
Comprehensive and standardized Credit Application
memos helped the Client in reduction of TAT for credit
approval while capturing new business opportunities.
Case Study – Credit Analysis and Appraisal
24PKC Advisory
Automated & Interactive Risk Dashboards Sample Extract
THE BUSINESS SITUATION
The Client had a complex organizational structure with
multiple subsidiaries and geographical presence. It
required assistance in development of integrated &
automated risk reports and dashboards based on
Business Intelligence (BI) application to assess
emerging risks and to evaluate management actions.
OUR ROLE
PKC Advisory developed customized interactive
dashboards to produce actionable risk insights where
the risk indicators could be retrieved with just a push of
a key. The following tasks were performed:
▪ Developed in-depth understanding of external
environment and business aspects to identify key
leading, forward looking and static indicators
▪ Understood information technology infrastructure
and developed data architecture & ETL (Extract,
Transform and Load) process to seamlessly
integrate dashboards with source in order to
periodically refresh them with no manual intervention
▪ Created dynamic content rich dashboard tool for
comparisons across time, subsidiaries, geographies,
businesses & peers
OUR VALUE ADD
This powerful dashboard tool supported effective risk
based decision making for the management to optimize
risk adjusted returns
Case Study – Automated & Interactive Dashboards
25PKC Advisory
Development of Retail Acquisition Scorecard Scorecard Development Process
THE BUSINESS SITUATION
The Client intended to build Challenger Scorecard for
personal loans as current scorecard performance was
deteriorating.
OUR ROLE
PKC Advisory developed a retail acquisition credit
scoring model based on multi-Logit regression model.
The approach included:
▪ Detailed study of existing customers’ one year
development data and 18 months performance data
containing Customer behavior data, Portfolio data,
Bureau and Delinquency data
▪ Data wrangling including – Missing Value imputation,
Outlier treatments and Customer segmentation
▪ Variable selection through Clustering, IV and
Correlation analysis and finding relevant variables
and Reject inference
▪ Developing and selecting the best model out of
various models that had the highest Accuracy, KS
and ROC to predict default probability of applicants
▪ Identification of default cut-off rate
▪ Validation of model & further calibration
OUR VALUE ADD
The Client embedded the scoring model in its existing
retail credit appraisal process to ascertain credit
worthiness of prospective retail clients.
Case Study – Credit Risk Analytics
SamplingModel
Development
Reject
InferenceScorecard
Acquisition Scorecard
Category Characteristics Attributes PointsCustomer
Score
Payment History
No. of Months
since most
derogatory record
No Public Records 70
400-5 10
"6-11 20
12-23 30
24+ 40
No of time 30+ days
Delinquent in last 6
months
Number of Time
gone 30+
delinquent
< 0 90
900-1 50
1-2 15
2-3 0
Outstanding Balance
Outstanding
balance in Dollar
($) value
No revolving trade 25
50
0 40
1-100 60
101-200 55
201-500 50
500-1000 25
1000 + 10
Month on BookNumber of month
on books
< 6 month 20
356-12 months 25
12-18 months 35
18 months + 45
26PKC Advisory
Implementation of RCSA Framework Sample Extract
THE BUSINESS SITUATION
In order to improve its internal control environment,
prevent regulatory observations and minimize control
breaches, the client wished to conduct a series of Risk
and Control Self Assessment (RCSA) workshops for its
critical functions.
OUR ROLE
PKC Advisory assisted the Clients’ Internal Controls
Department in identification of key operational &
compliance risks and related controls through RCSA
workshops with process and controls owners. It also
helped the Client in assessment of effectiveness of
identified controls to arrive at the residual risks.
For the key risks identified, PKC Advisory also
suggested the remedial action plans. Additionally, Key
Risk Indicators and Key Control Indicators were also
prepared for the respective business units which
included defined thresholds, in order to enable effective
monitoring and improvements to the control
environment.
OUR VALUE ADD
The exercise enabled the Client to develop a detailed
risk-response strategy for effective mitigation of key
risks. Through the RCSA workshops, the individual
business units were empowered to review and self-
assess their control environment.
Case Study – Risk and Control Self-Assessment
Almost Certain 2 12 4 7
Likely 2 4 17 4
Unlikely 1 21 19 0
Remote 7 9 0 1
Minor Moderate Major Critical
Extreme High Medium Low
Lik
elih
oo
d
Impact
Inherent Risk Heat Map
Almost Certain 2 4 0 0
Likely 19 7 1 0
Unlikely 22 3 5 1
Remote 26 17 3 0
Minor Moderate Major Critical
Extreme High Medium Low
Residual Risk Heat Map
Lik
elih
oo
d
Impact
27PKC Advisory
Our
Esteemed
Clients
28PKC Advisory
Our Esteemed Clients – BFSI Segment
Commercial
Banking
Corporate Finance
and Investment
Banking
Insurance
29PKC Advisory
Our Esteemed Clients – Across Other Sectors
PKC
Advisory
Team
31PKC Advisory
Team Profile
Payal Soni - Chief Operating Officer
Sachin Bansal - Principal Consultant
Bhupinder Singh - Senior Director
Vinay Gupta - Director
Payal has a total work experience of over 18 years (including 14
years at PKC Advisory). Payal is a CFA Charter holder from CFA
Institute, USA and holds Masters in Finance from Delhi University,
India.
At PKC Advisory, Payal is actively involved in business development
and client engagement She has led projects related to strategy
consulting, risk & rating advisory, feasibility study, business &
financial due diligence, debt advisory, equity raising support and
transaction support services in Bahrain, Kuwait, UAE, UK and USA.
She has been involved in assignments in the financial services,
insurance, real estate and diversified sectors.
Sachin has a total experience of over 12 years (including over 6
years at PKC Advisory) in banking, insurance & financial services
sector. He is a CFA Charter holder from CFA Institute, USA and has
an MBA in Finance from Amity Business School, India.
At PKC Advisory, he has been involved in various mandates
including risk appetite framework development, preparation of
standardized risk reporting, early warning framework, RWA analysis,
ratings advisory, strategy consulting, scenario modeling, business &
financial due diligence etc. for banking and insurance clients across
MENA region.
Bhupinder has a total work experience of over 15 years (including 9
years at PKC Advisory). He is a Chartered Accountant and has
cleared CFA Level III from CFA Institute, USA.
He leads the Financial Services practice at PKC Advisory. Bhupinder
is actively involved in business development, client relationship
management and project management. He has vast experience in
risk advisory, strategy consulting, financial planning, ratings advisory
and transaction support. Bhupinder has led numerous mandates in
these areas for leading banks and insurance companies in MENA
region.
Vinay has over 13 years of experience (including six years at PKC
Advisory) in banking & financial services sector. Vinay is a CFA
Charter holder from CFA Institute, USA and holds Masters in
Business Administration from ICFAI Business School, India.
At PKC Advisory, he has handled various mandates in area of risk
advisory including risk appetite framework development,
standardized risk reporting, and ICAAP & Stress testing across
MENA region. Additionally, Vinay has worked on various assignment
related to capital planning, strategy consulting, financial planning,
and transaction support.
Rupesh Srivastava - Director
Rupesh has a total work experience of over 14 years in providing risk
and business solutions in India and Middle East. He is a Chartered
Accountant and an MBA in Finance.
Prior to PKC Advisory, he worked with KPMG in their Governance
Risk and Compliance Services Practice wherein the work required
extensive project management and execution of risk-based
assignments combining multi-disciplinary backgrounds.
At PKC Advisory, Rupesh leads the Process Consulting practice.
He is actively involved in business development and in managing
client relationships and is also responsible for quality review and
overall delivery of the engagements.
Amit Chandra - Principal Consultant
Amit has a total work experience of over 13 years in Banking &
Financial services. He is a Bachelor of Economics and holds a Post
Graduate Diploma in Management from IIFT, India.
At PKC Advisory, he has been involved in a variety of mandates in
the areas of Advanced analytics like PD, LGD and EAD modeling,
IFRS 9 validation. Besides, he has worked on various assignments
related to customer, operational and web analytics.
Prior to PKC Advisory, he worked with Wells Fargo Bank, Royal
Bank of Scotland and GE capital in their Modeling & Analytics
Practice.
Email : [email protected] Website : www.pkcadvisory.com