Structured Trade Review for a large US Bank with highest self-review accuracy leveraging automation
Client : A large US bank
Objective
Functional Mandate
- To create an organisational model for global Structured Trade Review (STR) as an independent risk management function for one of the biggest US investment banks
- To build and maintain STR processes globally in BAU Mode
- To risk-prioritise review of historic inventory trades
Corporate Audit Deadline
- Stringent corporate audit deadlines to review the historic inventory trades
- To make the process sustainable, the business logic of edit control, new deal review and historic review had to be applied
- Edit control and new deal review capabilities and process had to be set up
Project Management Team
- A central project management team comprising CRISIL GRA and client representatives set up
- A workflow checklist approach finalised for implementation across asset classes, considering strategic requirements of the project
- Key decisions regarding scope of review, depth of review, review process maps standardised for all stakeholders
Governance and Reporting Standards
- To build a workflow tool platform to streamline the review process across asset classes
- To facilitate centralised monitoring of trade review
- To have a centralised MIS reporting and analytics platform
- Creation of a centralised knowledge repository for future reference and a deal library for all exotic products and review standards
CRISIL’s solution
Due Diligence and Analysis
Kick Off -
- Onsite team – Project team from Crisil GRA interacts with stakeholders. System and population analysis completed for the asset classes where there is no review process
- Identified competent resources to handle complex trade review across asset classes
- Training and ramp up of STR team
Trade review – Go Live
Time - 2 months
- Review for BAU commenced and other control process initiated to manage amendments to bookings
- Identified historical trades and commenced review process
- Covered 6 asset classes and reviewed close to 25 BAU trades and 20 historical trades per day
Ramp-up and Steady state
Time - 6 months
- Further ramp up of team to manage the inflow of BAU trades and backlog of historical trades
- Reviews increased to around 55 BAU trades and 60 historical trades per day
- Serviced ad-hoc requests such as book transfer during strategic changes, Front office requests on booking checks, process improvement tools, and creation of web-based MIS for relevant stakeholders
Current State
Today - 30 months
- Completed historical trade review and BAU reviews stabilised in the first year.
- Resources ramped down to handle pending queries in historical trades and manage BAU reviews including amendments
- Reviewed around 80,000 trades; gross PV impact of the errors identified crossed 79 million USD
Client impact
Project Management
- Comprehensive ownership of the STR function to cover 100% of all exotics traded globally on all asset classes including structured notes
Risk Management
- Developed the STR function from being a 'control activity' to an independent risk management function. STR review had an accuracy rate of more than 99.95%
Trade Reviews
- Reviewed around 80000 trades with a MTM impact of more than USD 79m
Resource Management
- Provided flexibility by moving people across asset classes in the STR function to suit organizational and project requirements
Knowledge Management
- Delivered exotic products and processes training to stakeholder groups and line of business through a highly skilled pool of associates
Analytical Reporting
- Created workflow tools and reporting suites to provide high value analytical reporting. Developed the centralised STR workflow tool and reporting suite to enable synergies across asset classes
Automation
- Automated the population validation and feeds to the STR workflow tool and automated management reporting
Questions