Advisory
The advisory element of an engagement looks at key business and risk management issues from a high level or strategic standpoint. Typical questions that are addressed in an advisory engagement are:
- What type of methodology should we use?
- What should be the key features of our risk policy?
- What functionality do we want from our new risk system?
- Which system should we select?
- What are the gaps in our current policies and processes?
- Does this model do what it says it does?
- How should our organisational structure be amended to maximise business benefits?
We believe that a successful piece of advisory requires a combination of listening to client needs and a deep understanding of the subject matter. Advisory work is undertaken by senior consultants who are subject matter experts and have seen how things work in other institutions. They have their own views, so we don’t just listen to what clients tell us and play it back in a nice looking presentation. Conversely, we do not impose standardised InteDelta solutions to problems to all clients irrespective of whether it’s appropriate to their needs.
Client
Retail banking division of large banking group
Location
UK
Client need
The bank was in the process of preparing the documentation for its Basel II waiver submission to the FSA. The documentation was prepared by each business unit and consolidated by a group function. The documentation pack amounted to several hundred documents and the group function needed to ensure the completeness, relevance and consistency of the documentation.
Our deliverables
We reviewed the documentation based on our Basel diagnostic tools. The review was designed to identify gaps in the documentation, inconsistencies and any areas of non-compliance with Basel rules. The deliverable was a detailed report which identified the areas where remedial action needed to be taken. The scope included all aspects of the Basel process including models for ratings, LGD, EAD, CCF, data and systems, management information and governance.
Client
Major retail and commercial bank
Region
UK
Client need
The client was planning to establish a function to actively manage its counterparty risk exposure by entering into hedging transactions. The bank needed advice on the target operating model for this function and wanted to know how equivalent functions are organised within its peers.
Our deliverables
The review was split into a number of areas:
- The role and mandate of the credit portfolio management function
- Quantitative issues relating to the calculation of the Credit Valuation Adjustment and how this can be hedged
- The infrastructure used to calculate CVA
- Relative responsibilities of the front office and risk management
In each area, we discussed requirements with the client, provided our own advice and ascertained the practices within peer organisations.
The final deliverable was a detailed presentation specifying the recommended target operating model.
Client
Wholesale banking division of large banking group
Region
UK and Benelux
Client need
The client wanted to develop its business with hedge funds but lacked the appropriate risk policies and infrastructure. It also required advice on where it could best build competitive advantage.
Our role
We first conducted a strategic review outlining the bank’s competitive advantages and current strengths and weaknesses in relation to its product offering, organisational structure, risk policy and infrastructure.
We benchmarked the bank’s hedge fund risk policies against its peers. This involved conducting interviews with key risk managers in peer institutions and also interviewing the bank’s clients to ascertain their views on the bank’s risk policies and service offering.
We identified a need for a middle office hedge fund client service function, and we oversaw the establishment of this department and defined its role and operating procedures.
We designed, built and implemented a system for cross-product reporting of hedge fund transactions. This involved the selection and parameterisation of a risk engine to pave the way for VaR based margining.
Client type
Wholesale division of European banking group
Region
UK
Client need
The client wanted to review the optimal organisation of its collateral management function, in particular whether the collateral management departments for derivatives, repo and stock borrowing should be combined.
Our deliverables
We performed a strategic and operational review covering processes, IT, human resources and cost considerations.
Client
Prime broker
Location
US
Client need
The client wished to provide its hedge fund client base with an online tool to enable them to conduct a self-assessment of their control environment.
Our deliverables
We designed an online survey which asked questions about various aspects of a fund manager’s risk and control environment. At the end of the survey the fund manager was presented with a score for the quality of its control environment and areas of potential weakness were highlighted.