Asset Management and Capital Markets

Financial institutions around the world are adopting advanced methods of measuring operational and credit risks as first steps to preserve minimum levels of capital reserves and free additional capital to invest in more profitable lines of business.

Hexaware recognizes the needs of banks to comply with the operational risk norms and has developed a proprietary solution, ARMOR to meet these requirements. ARMOR is an enterprise wide solution for effectively identifying, measuring and managing Operational Risk.

Operational Risk Management Solution - ARMOR

Key Features

The KRI framework is integrated with the loss events database. This allows user to identify and create new KRIs depending upon the occurrence of unexpected loss events.

The process monitor, an early warning system that captures "near-misses" and thereby creates a more robust risk management framework.

Web-enabled front-end for the completion and evaluation of assessments. Risk Assessment Questionnaire (RAQ) is highly structured and user friendly.

Heat maps depict in color-coded graphics the high-risk indicators measured against configurable threshold levels to provide intuitive “attention grabbers” for management action.

Decentralized loss data collection using a web-enabled front end. Losses stemming from one event can be grouped / split across organization and standard business lines.

A flexible and intuitive reporting capability that supports graphics

Modeling techniques including Monte Carlo simulation to compound probability distributions with a wide range of severity for the loss events. A number of distribution types are available, including Lognormal, Weibull for severity settings and Binomial and Poisson for frequency settings. Users can also define a range of other parameters against business lines, product lines, event types etc.

Solution Framework

ARMOR is based on the “Loss Distribution Approach” of the AMA, the most advanced and futuristic approach defined by Basel II. It also supports Basic Indicator and Standardised approaches.

KRIs (Key Risk Indicators) that measure the operational loss of a bank are extracted from the operational source systems using ETL tools and are loaded in the KRI database.

Loss event data are recorded through a web-enabled interface and are captured in the Incident Reporting Structure (IRS database).

If a bank does not have any significant loss data, then an initial data framework for the incident reports is created by circulating a Risk Assessment Questionnaire (RAQ) to supervisors and it is populated in IRS.

The data recorded through the incident reports is used to quantify operational risk using the VaR Engine.VaR engine employs an industry standard Statistical Simulation Tool to calculate VaR and also conduct What-If analyses and stress tests.

A flexible and intuitive query and reporting interface using an industry standard reporting tool is an integral part of ARMOR.

Benefits

Case Studies

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