Enterprise Risk Analytics

Neil Mathieson. Thursday, January 13, 2011

It is now possible to analyze, scenario plan and report financial risks on an enterprise basis.

Background – Enterprise Risk Management

Organisations face a variety of risks at any time, the probability, impact and interaction of these varying continuously.

ERM allows an organisation to identify, understand and manage risk in a holistic manner.

Consolidated information provides visibility, consistency and understanding, in turn leading to enhanced decision making.

Threats can be mitigated; resources directed to the best opportunity and contingency plans tested and optimised in advance.

In short, good ERM can have a positive effect on the liquidity, profitability and valuation of an enterprise.

Solution

Historically TreasuryView has operated on an asset class basis.

Henceforth it is possible to analyze portfolios on an enterprise basis – Rates, Forex and Commodity deals being presented and reported together.

This provides users with a current, consolidated view of values and risks across their enterprise.

Analytics

At present Enterprise analytics focus purely on valuation. The current reports are:

1. Enterprise NPV risk

This analytic allows users to mark-to-market their portfolio and identify market risk.

By showing the effect of a market movement next to the current valuation it simply and clearly identifies value-at-risk.

Analytic Description
Nominal by Deal The current nominal or notional of each deal
Maturity Date The date on which the deal expires
NPV by Deal The current market value of each deal
Impact of Interest Rate shift The difference between current NPV and that in the event of a 100bps interest rate rise
Impact of FX Rate The difference between current NPV and that in the event of a 10% exchange rate rise
Impact of Commodity shift The difference between current NPV and that in the event of a 10% commodity rate rise
Impact of Volatility shift The difference between current NPV and that in the event of a 10% volatility rate rise

Enterprise NPV Risk
(click on the image to view larger version)

2. Enterprise NPV risk, by Deal and Currency

This analytic allows users to mark-to-market their portfolio and identify the effect of a 10% change between the deal currency and reporting currency.

By showing the effect of a market movement next to the current valuation it simply and clearly identifies FX risk.

Analytic Description
Nominal by Deal The current nominal or notional of each deal
NPV by Deal The current market value of each deal
CurrencyThe difference between current NPV and that in the event of a 10% exchange rate rise

NPV difference, by Deal and Currency
(click on the image to view larger version)

Enterprise view grouping
Analytical outputs can be grouped
using the By Group button. This allows users to group data by criteria such as counterparty, instrument type, maturity, etc.

Scenarios
It is also possible to apply market change scenarios using the Scenario button. This allows users to see the effect of a change in rates on their portfolio.

These additional layers of analytics provide a simple classification and identification of risk, enhancing portfolio risk management

All analytical outputs can be exported to Excel.

Access

Enterprise analytics are accessed via the Enterprise drop down.

Enterprise Analytics

Existing Users

Existing users need take no action. Existing asset class analytics remain available but will be progressively migrated to an enterprise basis.

Please watch out for further updates. If you have any questions in the meantime then please contact us.

 

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