Automated support of “pre-trade risk controls” for issuer of structured products

Objective:

• Define a concept to improve the quality and efficiency of risk monitoring and decision making processes of an issuer of "structured products"
• Embed systematic “pre-client-transactional” risk assessments into workflow-supported decision making processes
• Seamlessly integrate risk assessments and decision-making processes from different functional / risk perspectives

Solution:

• Workflow concept built upon decision rules, incl. exception points & escalation processes
• Integrates different levels of decision making into same workflow concept, e.g.:
  
  • Overall risk appetite & bearing capacity
  • New asset classes
  • New or amended valuation models
  • New or amended product ideas
  • Specific client trade requests
  • Life-cycle management of client transactions / issued products
• Systematic risk-assessments at portfolio impact, individual product & transaction levels prior to transaction
• Integrates relevant risk categories and restrictions into pre-transactional risk assessments (issuer perspective):
  
  • Asset classes
  • Risks embedded in structural product components
  • Valuation risks & limitations
  • Instrument related risks and restrictions
  • Underlying restrictions
  • Issue & ticket size restrictions
  • Trading liquidity risks
  • Hedging capacity risks
  • Client related restrictions
  • Operational handling capacity risks
  • Pricing, tax-related and booking restrictions
  • Other compliance restrictions
• Defines monitoring and decision making rules, approval and exception handling processes
• Defines relevant monitoring elements, parameters, required data granularity and formats
• Includes relevant decision tables
• Definition of complementary “post-trade controls” and risk monitoring tasks

Main value added:

• Helps to balance Sales & corporate risk management driven necessities and interests
• Integrated workflow concept covering all relevant units, risks & restrictions
• Focuses decision making on essential risks of a given transaction in a timely manner
• Systematically integrates relevant risk perspectives into business decision making prior to client commitment
• Assessment at transaction, product & portfolio levels
• Specifications for technical implementation purposes
• Efficiency gains due to systematic data management