Rapid Risk Profiling with SAS & Coalition

Rapid Risk Profiling responds to the pressing current requirement for aligning staff remuneration to long-term profitability and capital at risk over time.

Beyond that, Rapid Risk Profiling is also the best first step to firm-wide crisis management capabilities. For example, in the situation where a major counterparty is at risk of failure or has recently failed. The solution answers all the following questions with one, single process:

• Where is the risk?
  Where in the world? Where in the organisation? On what system?
• What type is the risk?
  Is the risk related to market or legal or reputational issues?
• Who has the responsibility?
  When these answers matter most, there is greater urgency to identify who knows the real business story behind a risk number.
• What is the time horizon?
  With the focus on re-aligning remuneration to long term profitability, you need to know how much risk your capital or institution is exposed to over a year, two years, five years or longer.
• How credible is the risk number?
  You need to identify whether the information you are depending on, for credibility with the board or the regulators, originates from a long-established risk system, a dedicated business process or a spreadsheet on somebody's PC.
• What are the risk measures?
  Standard measures include VaR, mark to market, current exposure and counterparty exposure.

Rapid Risk Profiling revives the original 1990's concept of consolidated risk systems. However, it does this without the complexity of running the business day-to-day for profit maximisation. There are four key elements in achieving this successfully:

A focus on remuneration and potential crisis management strips away much of the complexity of risk systems whose legitimate task is to run the business day-to-day. Nevertheless, the core critical measures are retained.

A consistent mapping of the human capital in the firm builds on Coalition's unique expertise in implementing this deceptively simple concept.

Rapid consolidation of the key stakeholder risk measures is enabled by the SAS platform. The job needs to be done fast, in the fragmented IT landscape of a large financial institution. The only viable approach is to use a modern design-driven software platform. Bespoke integration projects aren't quick enough any more. Integration capabilities from pure-play risk vendors are limited.

Consistent presentation of risk measures requires the capabilities of the SAS risk management framework. This goes beyond merging data, to include pre-built risk calculations. These in turn allow reliable aggregation and interpretation of the many risk reporting sources across the firm.