The growing consciousness towards risk management within financial institutions globally has been complemented by various regulatory initiatives, not only to standardize global practices but also to paint a road map towards increasing sophistication. The new Basel Accord has lent impetus to the process of upgrading the risk management infrastructure across institutions.

Implications of Basel

Each institution needs to adopt a risk management framework that aligns with its nature and scale of business, vision, and its regulatory and economic environment. Benefits of a sophisticated risk management framework include the following:

• Lower losses and better recoveries
• Superior pricing capabilities
• Restricting Potential Losses
• Accurate provisioning
• Better allocation of capital
• Regulatory approval

Each of these benefits translates into improved shareholder value.

Our service offering provides clients a one stop shop that commences with a consultation phase, the correct selection of a packaged product, implementation and then ongoing maintenance of a live application. Services include Solution Architecture, Basel II Consulting, Implementation and Maintenance.

Hexaware Risk and Basel II Services

1. Solution Architecture

Hexaware provides architecture design services specific to client requirements.

• Solution Architecting
• Prospect Presentation / Solution Demonstration
• Responses to RFIs/RFPs/Tenders

2. Basel II Consulting

• Current State Assessments and Gap Analysis
• Data Adequacy / Quality Assessments
• Data Management Architecture

3. Development and Implementation

Hexaware's development and implementation services include:

• Credit Risk for Basel II , Basel II Extensions (PD / LGD Modeling), Economic Capital Approaches
• Operational Risk
  • Basel II Solution – Basic Indicator, Standardized, AMA
• Market Risk
• Structural Risk (ALM) and Funds Transfer Pricing (FTP)
• Enterprise Risk Management Framework

4. Maintenance

We maintain live applications for our customers that include support, maintenance and upgrade of implemented and third party solution. Our in- house expertise of Banking specialists and Risk specialists (Risk managers and GARP Certified Professionals) are the key to our deep and comprehensive understanding of the banking domain.

Key Solution Areas

Hexaware’s key solution areas in the Risk and Basel II areas include Credit Risk Management, Operational Risk Management, Market Risk Measurement and Asset Liability Management.

a. Credit Risk Management

Banks require comprehensive credit risk monitoring, analysis and measurement capabilities to support credit risk management in line with global best practices. These requirements imply business intelligence expertise to slice-and-dice their portfolios for various perspectives, while simultaneously developing models to explain components constituting expected and unexpected losses (EL and UL). In addition, banks need computation engines for regulatory capital, developing economic capital models, and allocation methodologies to support the transition to risk adjusted performance measurement.

b. Operational Risk Management

The regulatory impetus provided by the New Basel Accord has led to banks addressing the need of operational risk management (ORM). Banks have adopted various monitoring methodologies based on loss/risk area scorecards, heat maps and Key Risk Indicator (KRI) based frameworks. The more advanced banks have developed capabilities to model loss frequency/severity, and have adopted operational risk VaR models using different techniques. The latter category of banks has therefore developed capabilities to meet the Advanced Measurement Approach of Basel II.

c. Market Risk Measurement

Most banks have fairly stable market risk measurement capabilities since data availability has not historically been a challenge. Many banks have implemented Value at Risk (VaR) models using either simulation based methods (historical / monte-carlo) or parametric methods (variance-covariance). The key to usage of VaR has been the ability to allocate this VaR to dealers, instruments, portfolios and positions to enable effective market risk management. While VaR methodologies address the internal models approach of Basel, some banks have adopted the standardized approach.

d. Structural Risk / Asset Liability Management

Interest rate risk and liquidity risk are inherent in the banking intermediation function, and a large number of banks have developed analytical techniques to manage structural risks inherent in the bank balance sheet. Managing such risks is within the realm of Asset Liability Management (ALM) using metrics/techniques such as gap analysis, net interest income/margin analysis, sensitivity analysis and duration/convexity. Some of these measures are used to address Basel II Pillar I/II requirements. The area also covers sophisticated funds transfer pricing methodologies employed by treasury/balance sheet management groups for immunizing business units from structural risk and computing profitability.

Partnerships

Hexaware’s success in Risk and Basel II solutions is driven by a strong relationship with various partners who catalyze the warehousing and analytics implementations. Our partnerships include SAS and Oracle

Why Hexaware

Hexaware provides Risk and Basel II solutions by leveraging our rich Banking and Financial experience as well as Analytics capabilties. The Banking and Financial services segment at Hexaware offers end to end IT-BPO services for leading global banks. Our experience includes:

• Turnkey IT-BPO Services
• Over 35+ customers in the BFSI space
• Over 200 projects, including several Fortune 500 Global banks
• Large talent pool of domain and technolgy specialists
• Proven implementation expertise in Credit Card analytics and Data Warehousing