The document discusses integrated risk management (IRM) in banking. It outlines drivers for IRM including convergence of marketing, risk, and financial data and external regulatory pressures. It describes the desired evolution from siloed risk views to an integrated risk landscape. It also discusses building IRM capabilities in Indian banks through developing people, analytics, data resources, and preparing for sophisticated markets and instruments over time while following regulatory directives.

1. make connections • share ideas • be inspired
India’s Largest Analytics Forum
Integrated Risk Management
M K Jain
General Manager
Syndicate Bank
Copyright © 2011, SAS Institute Inc. All rights reserved.

2. Agenda
• Drivers for IRM
• Convergence of Requirements
• External Drivers
• Desired Risk Framework
• Indian Risk Management Imperative
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3. Drivers for IRM : Vision of Future Bank
Leading banks are investing in the ability to provide account holder “event” level information to
manage customer relationships, risk, regulatory drivers, and return on capital.
“The goal is to increase quality of relationships with profitable customers”
Enhanced Operational Enhanced Customer
& Capital Advantage Relationships
•Capital Allocation is directly tied
to accounts & product profitability •Siloed Channels replaced with
Events
•Risk processes are as integral as
accounting & forecasting •Products are offered at anticipate life
or firm level events
•Velocity of financial analysis is
changing •Customer RM balanced by Risk RM
Enhanced Regulatory
Reporting Capability
•Proactive risk & financial reporting
to internal and external agencies
•Ability to report in multi jurisdictions
•Ability to create risk and finance
exposure – price once & distribute
often
3
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4. Drivers for IRM : Convergence of requirements
Marketing
• Customer capacity
There is a “convergence” between Risk, Marketing
• Business Segments to Develop & Grow and Financial data that Financial Services
organizations utilize every day
• Market Segment Penetration
Enterprise View
Risk
• Risk Factors Influence Buy
• Customer credit worthiness Decisions
• Exposures • Profitable Markets Identified
• Geographic Concentration
• Proactive Capital Management
via “Firm Wide” stress testing
Finance
• Loss Reserves and Allocations
Quickly link Marketing and Sales direction with
• Accounting products that provide long term value while
determining the “credit worthy” customers to sell
• Capital
to.
• ROI
4
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5. Drivers for IRM : External Drivers
External Environment Opportunities
Integrated Infrastructure
Increasing regulatory pressure and risk of sanctions Granular, consistent, integrated risk & data processes
esp Investment and Universal banks Timely and accurate data access
Risk process embedded in the business management process
Falling business margins/profits in retail banking Synchronize group & BU Risk process
Enable more sophisticated Stress Testing using more granular
Credit Crunch/ Sub-Prime – identification of new data & improved analytics
bubbles
Volatile Markets – high speed trading Methodology
Integrated risk management
Risk adjusted return, return on equity for portfolio
Business Drivers Economic & business events impact to integrated risk profile
of portfolio
Maximise risk adjusted returns
Improve risk management
Policies
Regulatory Compliance Efficient Capital Management, including cash management.
Diverse Funding
Customer retention/CVM Reduced Funding, Concentration, Business & Economic Risk
Risk impact comprehended in customer decisions & pricing
Business continuity/stability/optimization
Disclosing risk/transparency
Operational effectiveness/reduce costs
5
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6. Risk Landscape – Traditional Silo View
Integrated Vision / Risk Aggregation / Control
Market Risk Credit Risk Operational Risk Business Risk
Data Warehouse
6
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7. Autopsy of the Crisis
2
Macro environmental
parameters
- Reversal in trend of rising real 3
estate prices coupled with
1 falling interest rates
Global
Crisis
4 5
7
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8. Benchmarking the Indian Environment
Structural Maturity
Instrument
Sophistication Analytics Maturity
Conservative
Orientation People Capabilities
Portfolio Complexity Data Availability &
Quality
Central Bank Portfolio Complexity
Maturity & Direction
IT System Support Susceptibility to
Risk Culture Global Events
8
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9. Desired Risk Framework
New View – Integrated Risk Landscape
Yesterday – Today - Tomorrow
Reporting/Management
Portfolio 1 Portfolio 2 Portfolio 3 Portfolio 4
Market Risk Rep-Risk
Liquidity
Credit Risk Oper. Risk xx-Risk
Scenario Generator
Micro economic & Macro-economic/external factors Financial Market
endogenous factors
Labour Market
Productivity
Environment
…..
9
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10. Indian Risk Management Imperatives
The concept of risk management, merely as a
‘control function’ is definitely unsuitable at best
and misleading at worst, in the current
environment and has to be viewed as a part of
‘shareholder value management’.
The movement from ‘control’ to ‘value’
management function is the crux of modern risk
management
10
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11. Capability Enhancement
People Analytics
Data Markets & Instruments
11
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12. Capability Enhancement
People Risk professionals with
specialized knowledge &
skills in risk management
Technology professionals
with specialized knowledge
in risk systems
Analytics professionals
with specialized knowledge
& skills in risk analytics
Build people capabilities over time
12
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13. Capability Enhancement
Acquire analytics tools and
Analytics systems
Acquire capabilities across
predictive, prescriptive and
investigative analytics
Cross functional analytics
capabilities to build
economies of scope
Acquire packaged analytics
Build analytics capabilities over time and analytics platforms
13
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14. Capability Enhancement
Data Build data repositories in
diverse areas to support risk
analysis
Clean data sets for
demographic, transactional,
psychographic, response
profiling
Plan, build, revisit, extend,
Build data resources over time use
14
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15. Capability Enhancement
Markets & Instruments Build a road map for
capabilities to sophistication
in Markets and Instruments
Plan and develop readiness
via policies, processes and
systems
Learn from global
Prepare for sophisticated markets & developments and guard
instruments over time against global mistakes
15
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16. Themes
Selection Process
Transparency and rigor
Domain driven selections
Weightage to technical capability
Overseeing Implementations
Quick re-alignment of priorities
Maintain time discipline
Vendor Management
Consolidation with committed partners
16
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17. Themes (cont’d)
Reserve Bank
Directives on next wave in risk management
Creating a Risk Culture
Imbibe risk culture across organization
Risk Governance Framework
Governance structure covering committee
structure, oversight
Governance processes
Special emphasis on risk, project and technology
governance
17
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18. “There is a misperception that all banks are
expected to be up and running come Timeline,
but the idea is to do it right by starting with
comprehensive self-assessments instead of just
doing it early.”
18
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19. make connections • share ideas • be inspired
India’s Largest Analytics Forum
Thank You
M K Jain
General Manager
Syndicate Bank
Copyright © 2010, SAS Institute Inc. All rights reserved.