1. Advance Risk Management Workshop: The World Bank, Washington DC Practical challenges in implementing Credit and Market Risk solutions and ways to solve them Closed Loop. Clear Vision. May 18, 2004 Arun Pingaley Sr. Solutions Architect Reveleus – an i-flex business

2. Advance Risk Management Workshop: The World Bank, Washington DC Agenda Preparations prior to implementing a credit or market risk solution Addressing Challenges Data Management issues Traceability issues for audit-ability Adaptability issues for continuing changes to policies Delivering a common solution for the risk management eco-system Leveraging regulatory capital infrastructure for enhanced uses Economic Capital, RAROC and beyond Pre-requisites of a comprehensive solution

3. Advance Risk Management Workshop: The World Bank, Washington DC Preparations prior to implementing a Credit or Market Risk solution Determine Scope of Final Solution Identify Credit and / or Market Risk solutions to be implemented Identification of a Business Sponsor, if “not regulatory” Identify a Data Centric approach Identification of a Project Team for implementation Risk Management resources Technical resources Take stock of Technological Investments To leverage current technology investments To ensure future purchases support the final goal Never forget the Goal – Risk Management All decisions should be towards THIS goal. Technical decisions should not derail the project

4. Advance Risk Management Workshop: The World Bank, Washington DC Challenges – Data Management Issues Identify Data Sources Data layouts, elements, Data transfer pipes Data frequency Real Time Periodic / Batch Data Quality Identify data quality issues Develop business rules to fix them Impute for missing data Data Integration Common codes Model Data for end-use Prevent hijack of the data model Delineate from Operational Data Test the Data

5. Advance Risk Management Workshop: The World Bank, Washington DC Challenges – Traceability issues for Audit-ability Address Pillar II – Supervisory Oversight Central Metadata Storage Technical definitions Business definitions Link the definitions Business definitions linked to technical definitions Link data model to data sources Ability to browse metadata Business definitions Tracing Parameterize transformations

6. Advance Risk Management Workshop: The World Bank, Washington DC Challenges - Adaptability issues for continuing changes to policies Don’t forget Pillar III – Market Discipline Parameterize the solution Change is constant Business requirements Source layouts Data models

7. Advance Risk Management Workshop: The World Bank, Washington DC Challenges – Delivering a common solution Risk Weighted Assets Calculations Risk Rating Value at Risk Risk Analysis Concentration Analysis Exposure and Collateral Rating Migration Analysis Utilization Analysis Aging, Recovery and Classification Analysis Simulations Stress Testing Back Testing

8. Advance Risk Management Workshop: The World Bank, Washington DC Challenges – Leveraging Infrastructure Economic capital, RAROC Risk based pricing

9. Advance Risk Management Workshop: The World Bank, Washington DC Pre-requisites of a comprehensive solution Data Quality Data Integration Central Metadata Parameterized Computation Engines Ease of Maintenance Common Solution for all outputs

10. Advance Risk Management Workshop: The World Bank, Washington DC Practical challenges in implementing Credit and Market Risk solutions and ways to solve them Closed Loop. Clear Vision. May 18, 2004 Advanced Risk Management Workshop: Preston Auditorium, The World Bank Washington D.C. 16 – 21 May 2004