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Financial Risk Management Consulting

Active financial risk management and its valuation are fundamental to banks’ activity. The success and financial security of banks as commercial institutions depends on finding the right balance between the income and its risk.

What are the consequences of inadequate financial risk management?

Financial risk management constitutions a crucial element of banks’ activity. Properly led, it allows for taking proactive steps to ensure more effective control over possible future events. Lack of such an approach, on the other hand, is oftentimes a source of a bank’s future crisis – to which they can only respond post factum, which not only is a more demanding challenge, but also jeopardises the bank’s reputation and operations, and is associated with high costs.

Why is financial risk management so important for banks?

Banks are unique institutions characterised by a high level of leveraging and financed primarily by the funds entrusted to them by their clients. Their unique position is particularly visible with respect to the risk level, which is significantly higher than for enterprises operating in other sectors. High leverage as well as a transformation of maturity and due dates, resulting from an asset-liability mismatch, are the most recognisable features of banks’ balance sheets. Financed by the funds borrowed from their clients, banks are also obliged to return such funds to the clients if requested. For the reasons described above, banks are particularly exposed to multiple risks such as:

  • liquidity risk,
  • market risk,
  • credit risk,
  • currency risk,
  • operational risk,
  • interest rates risk and many others.

The fact that banks collect deposits as well as their impact on the stability of the financial system mean that they are subject to a complex system of regulations and control by supervisory bodies.

We offer support at each stage of financial risk management

Thanks to a unique combination of our capabilities, including data science as well as legal expertise, we actively support banks in transforming their approach to risk management.

Successful risk management is only more important in the contemporary environment of low interest rates and, following the crisis of 2008-2009, increased financial regulation (such as Basel III, IV, BRRD), whereby banks generate lower profits, have higher capital and liquidity requirements and act under high pressure of lower costs and  downsizing. At the same time, they are under more increased supervision and need to meet more requirements than in the past.

We believe that working with our clients we help them not only to meet the prudential requirements, but also maintain the competitive advantage – for instance through introducing new cost-effective estimation methods and risk monitoring, fast and effective IT tools, as well as collaboration on completing regular tasks and activities.

Our team comprises over 70 people – including both analysts fluent in multiple programming languages and big data, as well as experts in regulations and bank processes. We work in the following areas:

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Find out how we can help you:

  • Creation and review of internal risk management strategies, its policies, procedures and measures (internal and regulatory), including calculations and methodology; 
  • Review of risk management systems and processes (credit risk, market risk, operational risk, liquidity risk, ICAAP, ILAAP, internal governance etc.);
  • Optimisation of risk-related processes including enhancing credit processes.

  • Monitoring, analysis and implementation of new rules and regulations and their adjustment to the existent internal norms, as well as evaluation of their impact on the firm’s operations;
  • An overview and a summary of the detailed requirements and recommendations for specific models and business activities;
  • Regulatory compliance and gap analysis, as well as guidelines for improving internal processes and regulations.

  • Bank know-how – a review and optimisation of risk processes as well as providing adequate documentation and support in implementation of new solutions or improvement of existing ones;
  • Regulatory expertise – analyses of compliance and the impact of new regulations on business and risk profile, strategy advisory with respect to capital and liquidity planning, in the context of regulations. 
  • Gap analysis and recommendations (existing, new, and forthcoming regulations), impact assessments and implementation of advanced risk management techniques;
  • Relations – supporting the firm management in coping with regulatory challenges and communications with regulators.

  • Building credit risk models (e.g. scoring, rating, IRB, a new definition of default, early warning systems) and support in their validation and review;
  • Calculation, verification and construction of impairment loss models (IRFS9);
  • ICAAP (quantitative aspects of credit risk) and stress testing;
  • Use of custom data sets for the purpose of credit risk assessment;
  • Up-selling and cross-selling models.

  • Support and review of advanced methods models;
  • Review and revision of operational losses;
  • Stress testing.

  • Calculation and verification of market risk measures (e.g. VaR, expected shortfall);
  • Behavioural models for the purposes of interest rates risk management;
  • Assistance with hedge accounting and derivatives;
  • Stress testing.

  • Impact assessment – advanced risk analysis and modelling as well as business processes optimisation with the support of analysts;
  • Expertise – building, validation and review of models and creation of guidelines for the management of each type of risk;
  • Compliance review of internal models and existing regulations as well as participation in audits as risk experts; impact of new regulations on the levels of capital and liquidity;
  • Implementation of IT systems – determination of business requirements and database architecture, support with User Acceptance Testing.

  • Impact assessment – advanced risk analysis and modelling as well as optimisation of business processes;
  • Expertise – building, validation and review of models and creation of guidelines for the management of each type of risk;
  • Gap analysis and impact assessment – compliance review of internal models with existing regulations as well as participation in audits as risk experts; the impact of new regulations on the levels of capital and liquidity.

Contact us

Łukasz Żochowski

Łukasz Żochowski

Partner, PwC Poland

Tel: +48 502184659

Piotr Bednarski

Piotr Bednarski

Director, PwC Poland

Tel: +48 519 507 049

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