CHICAGO-Alliant Credit Union here wants to get its hands on the latest in risk management technology-tools that pull data from every business unit at the CU and that consider the spectrum of risk, namely operational, credit and market.
"Some tools look at operational risk, some at credit, others do ALM risk management, but all independent from one another," said Mona Leung, CFO at the $6.8-billion Alliant. "It's critical to bring all three modules together because they comprise the three requirements for Basel II and for monitoring your capital level."
SAS, the analytics software provider, would like to help Alliant in its quest for a holistic view of risk: soon, SAS will release a product called Risk Management for Banking, said David Wallace, global financial services marketing manager, SAS. The solution aims to achieve comprehensive risk governance by emphasizing performance management.
Risk Management for Banking will include SAS's first integrated risk data infrastructure; the ability to measure and report risk across all risk types and business units; and options to award employees with incentives for risk-adjusted returns. Modules include specific risk applications, such as asset and liability management, market risk, credit risk and firm-wide risk.
Leung said she has high hopes that Alliant soon will deploy the SAS solution to assist in scenario planning. "Ideally, we could run simulations and quantify our credit, market and ALM risk on a predictive basis so that we can understand the risk on our capital level going forward. We could see how wide the variability is of our capital across various scenarios and figure out how to shorten the variability."
The forthcoming SAS product is inspired by an industry trend to entertain enterprise-wide risk analysis, which, according to Leung, is a relatively new concept.
"We see that firms are struggling to pull together all the data they need to analyze the different types of risk," said Wallace. "The challenge is to get an integrated picture of where the firm is now, and then, through scenario planning, optimization techniques and stress-testing, where the firm's overall risk position might be in the future, based on assumptions and economic factors."
Alliant, like many CUs, tries to assess enterprise risk using manual processes, Leung continued. "Every year, at a minimum, we build anywhere from 15 to 50 scenarios ourselves," she explained. "It'd be great to have a tool where you could pick a pre-defined interest rate structure and not have to build every piece."
Currently, Alliant uses SAS Enterprise Miner and Enterprise Guide to collect data and produce graphical representations of predictive models for business needs.
"These are very targeted ad-hoc analyses and forecasts," said Leung.
