Challenges

CRISIL has been a trusted partner for Phase 1- Phase 4 firms to achieve UMR compliance and has been supporting various Phase 5 and Phase 6 clients currently.

From our experience we see smaller banks and buy-side institutions face many challenges associated with the successful implementation of a UMR compliant program. For Phase 5-6 entities, some of the key areas to focus would be In scope assessment process, Risk Based IM calculations, collateral optimisation.  Some of the specific challenges for achieving compliance are:

• UMR program setup and successful implementation involves several key stakeholders across legal, front office, operations, counterparty credit risk, model risk, data, technology, internal audit, and senior management;
  
• Creating UMR compliant risk sensitivities, Proper assessment of SIMM data requirements, including curves, surfaces, and validated sensitivities, risk infrastructure set up;
  
• Collateral management, including initial margin and collateral forecasting, etc.;
  
• Establishing a UMR compliant SIMM governance structure, including testing and ongoing monitoring of SIMM outputs, and dispute resolution mechanisms;
  

CRISIL is a leading provider of risk analytics and traded risk related services, including UMR compliance and standard initial margin model (SIMM) implementation. The implementation of a UMR compliant IM program can be quite a nuanced exercise for phase 5 and 6 financial institutions. To ensure a timely compliance, the in-scope entities (within phase 5 and 6) need to start early to establish the IM program governance structure, including steering committee structure involving senior management sponsorship, and a cross-functional team.