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Moving from ALM Risk Data to ALM Business Intelligence

20/03/2015 - Risk Analytics Asset & Liability Management

Moving from ALM Data to ALM Business IntelligenceAs Albert Einstein said “If you can't explain it simply, you don't understand it well enough”…

Interest rate risk measurement typically has a number of processes attached to it:

  • Reconciliation of balance sheet data;
  • Confirmation of rates used for Earnings at Risk (EAR) and volatility calculations;
  • Parameters and assumptions appropriately checked;
  • Key outputs checked for reasonableness; and
  • Attribution analysis to interpret movement in measures.

Much time is devoted to these processes to derive a set of point in time numbers - such as: Value at Risk (VaR), Present Value of a Basis Point (PVBP) or EAR at a particular run date. However, how much consideration and effort do you need to give to turning this point in time data into useful business intelligence? 

Business Intelligence can be defined as “the process of transforming raw data into meaningful and useful information for business purposes”. In turn, this can be viewed as taking your basic data and turning it into risk metrics which provide your Asset-Liability Committee (ALCO) and Executives with information which gives a clearer deeper understanding of the market risks which it faces. Too often, ALM systems focus on generating point in time results, with no ability to track measures over time unless results are exported to Excel or data warehouses for further analysis.

Before being able to provide Business Intelligence back to the people such as ALCO members and Executives it is crucial to spend appropriate time identifying what it is the Committee wants to see - how the information can be presented in a way that will be useful and understood.

So what does your ALCO want to see:

  • Historical trend lines of key risk measures?
  • Stress test results mapped over time?
  • Aggregated product group forecasts with the ability to drilldown to the product structure?

A powerful risk analytics tool can make the task of turning your risk data into business intelligence a quick and easy exercise. The ability to display relevant measures either at a point in time or over a historical period, which can then be “sliced and diced” in any dimension in an efficient way, makes providing business intelligence a much easier proposition.

Moving from ALM Data to ALM Business Intelligence

Sample Protecht.ALM Dashboard

Tired of using spreadsheets to generate your ALCO and Board reports for interest rate risk management? To see how Protecht.ALM can help you turn your market risk data into powerful business intelligence then contact the Protecht team via phone +61 2 8005 1265 or email info@protecht.com.au 

 

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