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Date Created: 12/21/15
CASE STUDY M e rc Sream AUTOMATING LOSS MANAGEMENT IN A GLOBAL BANK Overview The bank follows a value-based multi service approach, helping institutional and retail clients ▯manage risk, comply with regulations, drive efficiency, and improve service levels. As a global organization, the bank’s clientele includes leading financial services firms in North and S▯outh America, Europe, Asia, Japan, Australia, and the Middle East. The bank’s senior management acknowledges that loss prevention is an importan▯t aspect of risk management; and endeavors to optimize performance of the bank by underst▯anding, and mitigating the effects of adverse operational losses on its business. Challenge As the bank’s global operations extended, the bank faced an array of risk challe▯nges. The bank’s senior management identified implementing an integrated risk platform as▯ the only solution to manage all associated operational risks. However, collating multi-dimensional loss information on operational risk parameters came as the major bottleneck. The bank had heterogeneous▯ risk management pro- Benefits grams running across multiple business units; therefore consolidating gl▯obal information on loss, near- misses, scenario, issues, and risk exposures became a formidable task. T▯here was no single system of record for loss data, which limited access to the loss information an▯d made it difficult to classify plemented systematic and paperless process across report on losses in multiple categories. Moreover, the bank was unable to integrate internal loss the enterprise with standardized loss data collectionth external loss data. process. Loss events and incidents are registered consistently and with data integrity assuranceThe bank’s Chief Risk Officer explains, “We were spending excessive amount of time in administrative are linked directly to the risks or controls ttasks such as aggregating loss information across multiple business line▯s, documenting exceptions, Efficient loss event tracking, email based notifica- tions and alerts, and risk assessment methodologieslating gross loss information, allocating appropriate capital, and ▯reporting risk exposures to the allows the bank to implement the industrybest senior management and the board of directors. We needed an integrated system that could consoli- practices for efficient loss management and preven-loss data from sub-systems at various geographical locations, facilitate customized loss re▯porting, tion. support a centralized loss database system, and enable a comprehensive r▯isk assessment methodol- ogy.” Enhanced Visibility: With the MetricStream solution, the bank has a complete visibility into loss events andward, the bank intended to leverage the solution to fill any ga▯ps that the bank might have resultant remediation process. This leads to bidentified - further improving the accuracy of modeling and other evalua▯tion tools, and creating the risk management and assured compliance. potential to reduce capital charges. Integrated Loss- and Risk Management: The solu- tion allows the bank to integrate loss managementution with the Risk Management process and support The bank selected MetricStream following an exhaustive competitive evalu▯ation. Recalling the severity and likelihood of occurrence. The solutionss of selection, the bank’s Chief Risk Officer says, “The bottom-line was to find a robust solution tracks issues identified during the root causethat could create a simple yet comprehensive loss data appro▯ ignificantly affecting the process, and ensures a closed loop management business team’s resources, ensure loss data integrity, and improve analysis, reporting and decision- cess, reducing the number of events and minimimaking.” He continues, “MetricStream emerged as our preferred choi▯ce. The solution addressed all their impact to the organization. our requirements, in terms of assessing, identifying, measuring, monitor▯ing, controlling, aggregating, Achieved Compliance with Basel II Requirementsand reporting of losses resulting from inadequate or failed internal pro▯cesses, people or systems.” for Loss Events: The MetricStream solution provides a comprehensive enterprise-wide solution that The MetricStream’s loss management solution allowed the bank to implement a gamut of ▯approaches, streamlines the collection, calculation and refew of which are discussed below: Accord.ational risk parameters, as per the Basel II Captured Loss Events and Near Misses: The MetricStream solution captured internal losses, external losses, and near misses in a single data storage facility. The solution supported categorization of loss type based on pre-defined criteria and severity level. Moreover, it enabled the correlation of current loss data with the past data for quick analysis and remedial act▯ions. Mapped Loss Events to Business Lines and Event Types: The MetricStream solution allocated loss events to multiple business or legal entities. The solution routed loss ▯events for review and analysis to authorized users based on preconfigured rules for review, approval, and disposition. The application’s decision tree functionality supported identification of reportable event▯s as well as the type of report that needed to be filed. M etrc Seam Triggered Investigative and Remedial Actions: The MetricStream solution provided statistical Why MetricStream and trend-analysis capabilities that supported identification and evalua▯tion of loss events as well as case investigation and tracking leading to an elaborate remediation or c▯orrective action process. The Implements centralized loss management syssolution triggered automatic alerts and notifications to appropriate per▯sonnel for initiating immediate business lines, and classify loss at type or sub-typetion to contain the impact of the issue, and conduct failure ▯investigation to identify root level cause. Ensures regular monitoring and review of operationalnternal Losses with RCSA, Scenario Analysis and KRIs: The MetricStream solution risk and loss parameters landscape. This integration transformed the risk assessment process from▯ a manual and subjective exercise to the one created by operational information. Automates calculation of capital requirements as per Basel II recommendations Created Central Loss Data Repository: The MetricStream solution provided clients with dynamic framework which can be implemented at branch-levelnt database - serving as a central repository for data from internal ▯losses, external losses, and as well near misses. This enabled the bank’s managers to conduct statistical analysis for internal manage- ment purposes and external reporting requirements. “MetricStream provided us with state-of-the-art enterprise-wide loss management tool that captured losses, and provided a remediation structure for reassessi▯ng risks and controls, compliance policy reviews, and business process changes. We are particularly pleased with the transparency of records, and the solution’s ability to determine upto- the-minute status of all issues and actions. Implementing the MetricStream ▯solution is a positive step toward spokesperson of the Company.easing workplace produc▯tivity”. says the Automated Risk Analysis: The MetricStream solution provided an automated system to assess the probability and severity of potential risk exposures, as well as to calc▯ulate the intensity of actual loss events. The management leveraged the results to predict future loss even▯ts, based on the predictive nature of past patterns or relationships between known and unknown varia▯bles. The solution identified variations of aggregation algorithm and instantly compared event data wi▯th all aspects of the greater ORM framework. Enabled Reporting and Metrics: Executive dashboards provided enterprise wide visibility into the issue management process and highlighted high-priority cases that needed▯ to be addressed. The trend analysis. Reports for status tracking, scorecards and compliance dashboards could be readilyfor accessed. Graphical executive dashboards and flexible reports with drill▯-down capability provided statistics and data by a variety of parameters such as business units, p▯rocesses and divisions. For more information, visit www.metricstream.com Copyright 2011. All Rights Reserved.
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