Active management of profitability
The client wanted to improve its credit granting and renewal process for the Business, Corporate and Institutional Banking and Retail Banking segments in order to align itself with the both regulatory need for provisioning based on expected risk costs and the market practice in developing management tools based on value (Risk Adjusted Return).
Content
- Pricing simulator: creating a pricing simulator that gathers all information concerning currently available products as well as client details and recommends a minimum price for the transaction. The design allows for its subsequent integration into the bank’s corporate systems so as to become part of its admission circuit.
- Client/portfolio profitability: calculating the risk adjusted profitability for each contract/client for its integration into the pricing engine and for managing the portfolio. Additionally developing an automated monitoring engine for procurement, with three levels of reporting.
- Integration into management processes: creating a series of additional tools that aim to allow for the adaptation of the tool to the evolution of procurement: client management levers, sanction circuit, price approval powers, management monitoring (RAR ex-post), communication and training plan and adapting the incentives model.
Results
- The client has improved its overall admission process, noting greater discipline in procurement (higher prices and lower risk cost) and a reduction in the decision management implementation time (time-to-market).
- By having more management and analysis tools, there is now greater agility in adapting to the evolution and new trends in the different procurement products/segments.
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Defining the risk management model of a financial institution in Latin America
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