Dear SAP Banking Community members.
Weeks ago, we discussed Liquidity Risk and Maturity Mismatch respectively.
We saw how Maturity Mismatch between some banks Assets and Liabilities in September 2008 generated enormous financial problems which threatening the stability of the whole Financial System.
I proposed back then to comment about SAP Bank Analyzer’s value proposal in regards to Liquidity Risk.
One of the difficulties of Liquidity Risk Management is it’s deep relationship with other forms of risk, like market and default risk. For instance, any economic event which increases the Default Risk of a portfolio will determine the future liquidity (default of promised cash-flows affects liquidity), and a very similar scenario we would see with Market Risk.
For that reason, Market Risk, Counterpart Risk and Liquidity Risk shall be evaluated together in a systemic approach.
When we evaluate a micro-portfolio, we should take into consideration if that micro-portfolio generates liquidity or dry up liquidity, is there a maturity mismatch and what are the market and credit risks associated with that micro-portfolio.
From that perspective, the systemic approach of Bank Analyzer and an integrated architecture of the Financial Database provide a significant advantage, as the system shares a common data model for the Financial and Business Transactions. It also represents the Financial Contracts and Economic Events related to the micro-portfolio, according to the risk analysis (Liquidity Risk, Market Risk and Counterparty Risk).
In addition, the segmentation service gives the necessary capacity for enhancing the micro-portfolio’s definitions by using “Descriptive Characteristics”.
In my opinion, that is a significant competitive advantage which definitely supports the decision making of ALCO (Asset and Liability Committee) members of any bank in regards to the critical activity of effective risk management. In particular, in the current economic environment, the more limited resources are, the more critical accurate and effective risk management becomes.
Looking forward to read your comments.
Kindest Regards.
Ferran.
Weeks ago, we discussed Liquidity Risk and Maturity Mismatch respectively.
We saw how Maturity Mismatch between some banks Assets and Liabilities in September 2008 generated enormous financial problems which threatening the stability of the whole Financial System.
I proposed back then to comment about SAP Bank Analyzer’s value proposal in regards to Liquidity Risk.
One of the difficulties of Liquidity Risk Management is it’s deep relationship with other forms of risk, like market and default risk. For instance, any economic event which increases the Default Risk of a portfolio will determine the future liquidity (default of promised cash-flows affects liquidity), and a very similar scenario we would see with Market Risk.
For that reason, Market Risk, Counterpart Risk and Liquidity Risk shall be evaluated together in a systemic approach.
When we evaluate a micro-portfolio, we should take into consideration if that micro-portfolio generates liquidity or dry up liquidity, is there a maturity mismatch and what are the market and credit risks associated with that micro-portfolio.
From that perspective, the systemic approach of Bank Analyzer and an integrated architecture of the Financial Database provide a significant advantage, as the system shares a common data model for the Financial and Business Transactions. It also represents the Financial Contracts and Economic Events related to the micro-portfolio, according to the risk analysis (Liquidity Risk, Market Risk and Counterparty Risk).
In addition, the segmentation service gives the necessary capacity for enhancing the micro-portfolio’s definitions by using “Descriptive Characteristics”.
In my opinion, that is a significant competitive advantage which definitely supports the decision making of ALCO (Asset and Liability Committee) members of any bank in regards to the critical activity of effective risk management. In particular, in the current economic environment, the more limited resources are, the more critical accurate and effective risk management becomes.
Looking forward to read your comments.
Kindest Regards.
Ferran.
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