case-study
Latin American Bank: Reducing Operational Risk with FINCAD

HIGHLIGHTS

Client: Latin American Multilateral Bank

Business Objectives:

  • Decrease operational risk
  • Gain access to P&L, CVA and MTM reports
  • Increase the frequency of risk reporting
  • Improve valuation accuracy by implementing OIS discounting for 12 currencies

Requirements:

  • Introduce powerful, integrated risk management solution for derivatives
  • Gain implementation and ongoing support from an expert provider

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“Having the ability to move our risk reporting from a once monthly to a daily function has made a world of difference. Producing results more frequently means there is less risk involved and we are operating more efficiently.”

Head of Market Risk, Latin American Bank

 


Challenge

This Latin American Bank is a multilateral government-owned entity. The Bank’s Treasury Division manages a multicurrency portfolio of interest rate swaps, cross currency swaps and FX Forwards, which are part of the treasury operation for hedging the Bank’s exposures. The Bank had goals of automating processes surrounding the input and output of trade and market data, and establishing integration with the back office. 

Solution

Having been a client of FINCAD for more than a decade, the Bank decided to deepen their relationship with FINCAD by implementing functionality for modeling, pricing, valuation, and risk.

FINCAD was chosen for its:

  • powerful curve building, including the ability to implement OIS curves for a long list of currencies,
  • ability to produce accurate P&L Attribution and CVA results,
  • functionality for making workflow more manageable and efficient for the Market Risk group and other areas in the Bank consuming derivatives results
  • expert Professional Services, giving the Bank ongoing access to expert quant resources. 

Results

The Bank has experienced several positive benefits since using FINCAD:

Time Savings and Better Accuracy: The Market Risk, Operations, and Accounting departments are benefitting from a drastic reduction in manual processes. More time is available to spend on strategic work, and operational risk related to human and spreadsheet error is reduced. 

Automation: The Bank is now able to speed up valuation and risk calculations, automating the complete set of reports down to just 10 minutes. 

Intraday Reporting: While once valuation and risk exposure reports were only generated at the end of the month, now the Bank has access to these key calculations intraday and reports them on a daily basis. 

Improved Risk Management: Richer risk calculations such as scenario analysis, CVA, and P&L attribution now enable the Bank to maintain greater control over its business.

Looking Forward

FINCAD's valuation and risk engine is both powerful and flexible, making it easy for the firm to add more currencies or derivative trade types as their business strategy expands or changes.