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. 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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