Risk Management

This page explains implementing the use case of credit risk management using a combination of Finscale micro-services.

Summary: Base behavior includes Automation of Underwriting with Analytics assessment at a unit level of financial product origination say loan origination. Secondly, the behavior includes assorted provisioning of financial product templates, (translated as an offer say a loan offer). Thirdly, the behavior includes generating control methods and triggers for Risk Mitigation driven by systematic reporting, both inside and outside the system.

  1. Automation of Underwriting for a single origination application: A decision journey screens and filters eligible applications and associates an assessment score based on a calibrated model. The bulk of originated applications are either auto-approved or rejected while flagging a few for supervision.

2. Product mapping with the originated application to translate into a product offer:

A matchmaking algorithm that depends on already configured products and the relationship between the scorecard of the stated origination application.

3. Identifying a library template of the variable configuration of a Product. Identification of static factors with dynamic values, E.g loan product defined with ranges of amounts in consideration such as Loan Amount, Approved Loan Amount, Disbursal Loan Amount

Ability to group these products for an entity to entity-based mapping.

Such as loan products offered to a specific group e.g in case of salary advances, Employers, or companies as entities. Another example is of women-oriented loan or income ranges. The loan product association with configurable factors are enhanced by the data model as below.

4. Reporting and information representational standards of such a machine-Type of Analytics Reporting Standards.

5. Identification of control methods and recovery triggers for Risk management(both manual and auto)

Loan Portfolio at Analytics is tied to Loan Portfolio Below PAR, Above PAR, other such classification. Factors such as Loan Loss provisioning further requires establishing a sound relationship with control methods and their application. It is also required to identify and assess the role of machine learning models that supersede the manual rules intervention in a non-directional movement of data process.

6. The configurable module of Risk Management provides grounds for customizing different data models and entity to entity mappings.

The use case is further enhanced by following features:

Feature

Description

Secondary Description

Treasury Analysis

Treasury Assessment

Ability to track real time status of Treasury of FI.

Securitization Tagging

Cost of equity, risk

Calculate the return potential stockholders expect before investing in a loan bucket or loan distribution

Fund management

Fund mapping and association with financial products

Ability to map loan distribution to different funds

Portfolio Tracking

Which among a given set of underwriting decisions are most beneficial by estimating opportunity cost, net present value, internal rate of return, payback period

Real time tracking of lending portfolio, savings portfolio etc.

Working Capital Enhancement

Maximise (Assets - Liabilities)

Ability to visualize working capital status of any FI

Enterprise value

Calculate market valuation, liquidation value factors and continous tracking over the lending portfolio with base factors

Ability to visualize valuation within the IFRS framework

Cash flow prediction

Predict future/present value of money and company’s inflows/ outflows for projected income/expenses over a period of time

Strong prediction based on Accounting service of Finscale

NPA Management

Non performing Asset

Ability to Detect, measure, predict, and anticipate, among other things, market volatility, liquidity risks, financial stress, housing prices, and unemployment to reduce non-performing assets

Risk Reduction via gamification

Product recommendation & Campaign Management

Ability to predict customers with propensity to churn, their relationship score & lifetime value in order to retarget back with personalised offers, insurance plans, further lending etc.

Loan loss provisioning and distribution

Creating distributions and provisioning criteria

Distributing the portfolio by earmarking predicted future loss

The Risk Management System with Finscale follows a model agnostic and Simulation based approach; Using a combination of Finscale micro-services such as Analytics, Customer, Financial Product, you can;

Simulate Risk provisioning over test data or historical data without effect over system performance

Ability to test Risk Mitigation approaches such as Risk provisioning e.g loan loss provisioning

Ability to test Risk Mitigation approaches such as Risk provisioning e.g loss provisioning frequency

Ability to run Risk Mitigation approaches such as Risk provisioning e.g loan loss provisioning, loss provisioning frequency

Ability to run Risk Mitigation approaches such as Risk Category mapping e.g category mapping with scorecard indices

Ability to run Risk Mitigation approaches such as Risk Category mapping e.g category mapping with loan product library

You can simulate Risk over test data or historical data without effect over system performance using Finscale Analytics;

Simulate credit models with model Agnostic Approach

To modeling and maintaining business rules

System Administration: Dynamic Score Card Generator:

Design and Setup Score card components for Credit underwriting and underlying risk categories

Ability to create, delete, update and read Eligibility Index, based on multiple factors

Ability to create, delete, update and read Stability Index, based on employment tenure & employment type factors

Ability to create, delete, update and read Affordability Index, based on income factors such as DTI, existing loan liabilities, LTV etc

Ability to update and read External Credit Reporting System Data such as Experian, CRIF etc.

Ability to create, delete, update and read Historical Behaviour Index: Deposit and Withdrawal Behaviour for Savings and Checking Products

Ability to create, delete, update and read Historical Behaviour Index: Premium Transaction, Claims & Deductible for Insurance Products

Ability to create, delete, update and read Character Index: Social Capital

Ability to create, delete, update and read Character Index: Social Media

Ability to create, delete, update and read Alternative Assessment Index: Expense Assessment & Spend analysis: Spend management by tracking spending patterns of individuals, with saving suggestions and financial advice for ROI

Ability to create, delete, update and read Alternative Assessment Index: Income Tax Assessment

Ability to create, delete, update and read Alternative Assessment Index: Financial Statement Assessment

Ability to create, delete, update and read Historical Behaviour Index: Repayment Behaviour for Reschedule and Refinance

System Administration: Business Rules for Lending use case, please go to Credit Underwriting & Risk Profile Assessment​

System Administration: Business Rules for Savings & Checking including digital wallets;

Workflow Components of Savings Product or DDA Lifecycle Events other than standard components e.g Approval, Fund Deposit and Withdrawal

Ability to create, delete, update and read loan lifecycle events and branches of Savings and DDA lifecycle events

Screening and filtering criteria based business rules for Checking and Savings Underwriting: Pre Screening or Eligibility Analysis

Ability to create, read, update and delete screening business rules in a graphical approach

Ability to create, read, update and delete weightage to different screening criteria

Ability to create, read, update and delete validation and restrictions in screening criteria in a graphical approach

Define Risk Categories for Savings (Risk rating)

Ability to create, read, update and delete Risk Categories definitions

Ability to create, read, update and delete Risk Categories mapping to specific Users

Ability to create, read, update and delete Risk Categories mapping to Savings and DDA Products

Ability to create, read, update and delete Risk Categories mapping to dynamic Score Card

Ability to create, read, update and delete Risk Categories mapping to Savings Portfolio management

System Administration: Business Rules for Insurances;

Workflow Components of Insurance Origination Lifecycle Events other than standard components e.g Approval, Premium Deposit and Claims Events

Ability to create, delete, update and read loan lifecycle events and branches of Insurance lifecycle events

Screening and filtering criteria based business rules for Insurances and Claims Underwriting: Pre Screening or Eligibility Analysis

Ability to create, read, update and delete screening business rules in a graphical approach

Ability to create, read, update and delete weightage to different screening criteria

Ability to create, read, update and delete validation and restrictions in screening criteria in a graphical approach

Ability to create, read, update and delete Risk Categories definitions

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Define Risk Categories for insurances (Risk rating)

Ability to create, read, update and delete Risk Categories mapping to specific Users

Ability to create, read, update and delete Risk Categories mapping to Insurance Products

Ability to create, read, update and delete Risk Categories mapping to dynamic Score Card

Ability to create, read, update and delete Risk Categories mapping to Insurance Portfolio management

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