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 South America, Europe, Asia, Japan, Australia, and the Middle East.
The Client: A Global Bank
The bank’s senior management acknowledges that loss prevention is an important aspect of risk management; and endeavors to optimize performance of the bank by understanding, and mitigating the effects of adverse operational losses on its business.
The bank selected MetricStream following an exhaustive competitive evaluation. Recalling the process of selection, the bank’s Chief Risk Officer says, “The bottom-line was to find a robust solution that could create a simple yet comprehensive loss data approach without significantly affecting the business team’s resources, ensure loss data integrity, and improve analysis, reporting and decision-making.” He continues, “MetricStream emerged as our preferred choice. The solution addressed all our requirements, in terms of assessing, identifying, measuring, monitoring, controlling, aggregating, and reporting of losses resulting from inadequate or failed internal processes, people or systems.”
The MetricStream's loss management solution allowed the bank to implement a gamut of approaches, few of which are discussed below:
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 actions.
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 events as well as the type of report that needed to be filed.
Triggered Investigative and Remedial Actions: The MetricStream solution provided statistical and trend-analysis capabilities that supported identification and evaluation of loss events as well as case investigation and tracking leading to an elaborate remediation or corrective action process. The solution triggered automatic alerts and notifications to appropriate personnel for initiating immediate remedial action to contain the impact of the issue, and conduct failure investigation to identify root cause.
Combined Internal Losses with RCSA, Scenario Analysis and KRIs: The MetricStream solution combined self assessment, loss event, and KRI data to provide a holistic view of the bank’s risk landscape. This integration transformed the risk assessment process from a manual and subjective exercise to the one created by operational information.
Created Central Loss Data Repository: The MetricStream solution provided clients with dynamic loss-event database - serving as a central repository for data from internal losses, external losses, and near misses. This enabled the bank’s managers to conduct statistical analysis for internal management purposes and external reporting requirements.
Automated Risk Analysis: The MetricStream solution provided an automated system to assess the probability and severity of potential risk exposures, as well as to calculate the intensity of actual loss events. The management leveraged the results to predict future loss events, based on the predictive nature of past patterns or relationships between known and unknown variables. The solution identified variations of aggregation algorithm and instantly compared event data with 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 solution provided complete real-time visibility into the issue and exception data with analytics for trend analysis. Reports for status tracking, scorecards and compliance dashboards could be readily accessed. Graphical executive dashboards and flexible reports with drill-down capability provided statistics and data by a variety of parameters such as business units, processes and divisions.
Why MetricStream was Selected
Implements centralized loss management system to calculate losses and risk exposures at the multiple business lines, and classify loss at type or sub-type level
Ensures regular monitoring and review of operational risk and loss parameters
Automates calculation of capital requirements as per Basel II recommendations
Increases global consistency through an integrated framework which can be implemented at branch-level as well
As the bank’s global operations extended, the bank faced an array of risk challenges. 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 programs running across multiple business units; therefore consolidating global information on loss, near-misses, scenario, issues, and risk exposures became a formidable task. There was no single system of record for loss data, which limited access to the loss information and made it difficult to classify and report on losses in multiple categories. Moreover, the bank was unable to integrate internal loss data with external loss data.
The bank’s Chief Risk Officer explains, “We were spending excessive amount of time in administrative tasks such as aggregating loss information across multiple business lines, documenting exceptions, calculating gross loss information, allocating appropriate capital, and reporting risk exposures to the senior management and the board of directors. We needed an integrated system that could consolidate loss data from sub-systems at various geographical locations, facilitate customized loss reporting, support a centralized loss database system, and enable a comprehensive risk assessment methodology.”
Going forward, the bank intended to leverage the solution to fill any gaps that the bank might have identified - further improving the accuracy of modeling and other evaluation tools, and creating the potential to reduce capital charges.
The MetricStream solution implemented systematic and paperless process across the enterprise with standardized loss data collection process. Loss events and incidents are registered consistently and with data integrity assurance; and are linked directly to the risks or controls that failed. Efficient loss event tracking, email based notifications and alerts, and risk assessment methodologies allows the bank to implement the industrybest practices for efficient loss management and prevention.
With the MetricStream solution, the bank has a complete visibility into loss events and resultant remediation process. This leads to better risk management and assured compliance.
Integrated Loss- and Risk Management:
The solution allows the bank to integrate loss management with the Risk Management process and support assessment of risks based on parameters, such as severity and likelihood of occurrence. The solution tracks issues identified during the root cause analysis process, and ensures a closed loop management process, reducing the number of events and minimizing their impact to the organization.
Achieved Compliance with Basel II Requirements for Loss Events:
The MetricStream solution provides a comprehensive enterprise-wide solution that streamlines the collection, calculation and reporting of operational risk parameters, as per the Basel II Accord.