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Financial Risk Forecasting Model (FRFM)

We live in Unprecedented Times

We are currently living in unprecedented times brought upon by the emergence of COVID-19 virus and the subsequent lockdowns imposed by nations as a response. The impact on all economies is substantial and is expected to last for a significant number of months and years to come.

Although the banks are generally regarded as essential service providers, they will sustain severe impacts on their businesses through lowered demand and risk factors, such as requests for payment holidays, operation disruptions and outright defaults.

Our Understanding of The Need

Lenders need a sound yet agile means to navigate this new environment by testing the soundness of their business through balance sheet management practices (risk appetite, ICAAP & ILAAP) as outlined in the diagram below.

Financial regulators are also calling on (or expected to call on) banks to provide a stress testing forecast to consider the latest and unexpected market conditions to ensure capital adequacy.

Our Offering

We have an integrated financial risk forecasting model (FRFM) service offering that combines our client’s financial and risk data to deliver a ready-to-use solution for managing and optimising the performance of their businesses which can be done under any macro-economic or strategic scenario/environment.

High-level, the model provides the following features and capabilities:

  • Credit Risk Engine
  • Financial Risk Forecasting – Driver Based
  • Stressing Testing
  • ICAAP & ILAAP input
  • Recovery and Resolution Planning input
  • Balance Sheet Optimisation
  • Individual and Concentration Exposure Impact Analysis

Model Methodology

The model integrates data using a methodology as outlined below. Our clients provide us with financial and risk data that we input into the model which can be achieved on a short turnaround.

Model Methodology

Deliverables

Our Financial Risk Forecast Model (FRFM) provides the following deliverables:

  • Integrated Financial Forecasting Model
  • Balance Sheet Management Model and Framework
  • Microsoft Excel Spreadsheet Format
  • Model Methodology Documentation
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