Financial services– Risk and compliance solutions
HCL Technologies’ Risk & compliance solutions team helps banks and financial services institutions in mitigating the challenges arising from the impact of dynamic regulations, financial crime, cybersecurity threats and emerging technologies.
Risk has taken a new dimension after the global financial crisis of 2008 in which huge losses from over-the-counter (OTC) derivatives caused the global financial services upheaval.
The Basel Committee on Banking Supervision (BCBS) initiated the Fundamental Review of the Trading Book (FRTB) in the years following the financial crisis of 2007-2009, with the aim of completely revising the approach to calculating risk-based capital requirements for trading activities (i.e., market risk capital). BCBS introduced the so-called “Basel II.5” package of reforms. This included a significant increase in the market-risk capital standards for banks while increasing the overall quantum of capital required for market risk.
Banks have subsequently been asked by regulators to carry out improved risk measurement and de-risk their exposures to counterparties. Financial markets typically face financial risk due to changes in interest rates, foreign exchange rates and commodity and asset prices. This increases the possibility of default by individual companies and consequently the sectors they operate in.
We serve our banking clients worldwide to ensure compliance with risk frameworks stipulated in the Basel Accords. By implementing both qualitative and quantitative approaches in financial risk management, HCL Technologies protects economic value in the trading and holding of financial instruments by pricing, tracking, reporting and exposing its risks.
Recognized by Everest as a leader in its peer group and also in enterprise risk management in the financial services industry, HCL Technologies’ Risk & compliance services offer RegTech compliance solutions for banks. These tailor-made solutions enable our clients to tackle financial crime and be fully compliant with the respective laws, regulations and the codes of conduct applicable to their banking activities. Through innovative solutions, we support financial services clients to mitigate the risk of legal or regulatory sanctions, material financial loss or loss in reputation.
Challenges and opportunities
Solution building blocks
Credit, market, liquidity, stress testing
Capital, MIFID 2 transactions, AIFMD, IFRS17
KYC and client onboarding, AML
Process risk management and assurance, processes analytics
GRC tools, data security and privacy, IAM
BCBS 239, risk and finance alignment, big data implementation and analytics
Infrastructure operations, cloud security and support, application operation and support, application development and maintenance, COTS product implementation and managed business services (BPO)
Functional Area: Model Development
Engagement Description :
The bank had been struggling to get validation of credit risk models for approval by the regulator. The bank reached out to HCL for performing an independent audit and deep dive validation of their key credit risk lending models
Assessment, review, and challenge of the outputs of the Irish Banks’ model validation program. Devised co sourcing test plan for testing periodic validations of the 5 IRB Credit Risk Models. Conducted Tests on the risk models including Mortgage PD andCorporate PD, , drafted the final audit report for R&C assessment. HCL played a role in the client’s 3rd line of defense supporting the Risk Audit function. The results of the Audit was used to gain local Regulatory Supervisor approval, ensuring the right level of testing and controls work was deployed to independently validate the client’s Risk modeling. The R&C validation unit and co-sponsored project steering review team setup by HCL became part of the governance framework for the overall Risk Audit, thereby ensuring scrutiny, high quality results and adherence to the local central bank and Basel regulations.
- All tests in the Audit plan were executed as pertaining to the overall Risk Audit schedule communicated in the governance status reports.
- Issues identified on collateral data feeding into the rating systems allowed client to note to regulator dealing with IRB model approval to plan for any further remediation work with HCL able to support.
- Recommendation given to automate the current Audit capture and workflow system a manually intensive process and offer better solutions to undertake the same functions without the need for so much manual intervention. Identified future benefit for audit team to reduce audit times as well as make improvements on documentation and align to the banks strategy around maintaining an efficient digital footprint.
- Business processes for SAS data capture and transfer flagged for future improvements. HCL able to offer AI, machine learning and Risk analytics products Actian Vector which can perform Risk aggregations and produce complex Risk calculations to enable risk processing and improve data quality
Compiled final results of IRB model review
Functional Area: IFRS 9 Compliance & Forecasting Credit Losses
The bank must be enabled to be compliant with the IFRS9 regulations within strict timelines and be able to forecast credit losses
Analysed data gaps (Risk data including PG, LGD, EAD) proposed data solution, performed data modelling, designed and built IFRS 9 data mart. Involved in the requirements gathering, analysis, design and development phase to provide impairment related data to comply with the regulations from IASB. The reporting framework applied disclosure requirements, prepared group financial reports including the banks subsidiaries. This was a global solution for the bank which covered Europe, Middle East, APAC & Africa.
Avoided huge penalties and business restrictions due to compliance with IFRS 9 and was able to produce a daily feed of data without compromising on processing time and data quality. The bank had seamless coordination amongst risk, business and finance units.
Functional Area: Enterprise-wide multi-year Risk Transformation Program
Define a consolidated solution platform to deliver requirements across key strategic risk transformation work streams (EC, Modelling, Stress Testing, Risk MI)
HCL’s Architects followed the TOGAF standards to develop a target architecture view by using a scorecard-based evaluation of vendor platforms. The participants in this activity were the key business and IT sponsors’ who ranked the vendor platforms and provided an objective measure for future vendor selection. HCL helped define and build the Enterprise architecture and Risk transformation Program architecture to address all corners of the business. The R&C models were implemented on data, business, technology, and application. Several interfaces were created amongst these pillars to eliminate risks and adhere to organization, and industry compliance methodologies.
A governing organization was setup to enable strategy, ensure review boards were the check posts, optimal portfolio management, and technology lifecycle roadmaps were in place. This resulted in achieving the target architecture using industry best practices and provided objective criteria for vendor solution evaluation, resulting in robust decision making; Generated TCO reduction of c. 30% Application simplification (12 platforms rationalised to 2)
Functional Area: Building a Market Risk Platform
HCL has implemented a bespoke Market Risk Platform. As a part of implementation HCL has owned end-to-end delivery of the Platform, Change Management, & Transition Management
HCL has supported the bank in implementation, and transformation of its Market Risk Management Landscape through changing economic conditions and evolving regulatory norms covering all measures required for Basel II, II.5 and III. The platform has helped in achieving insights and transparency into the banks risk exposures, from clearing and settlement costs and uncertainties. The platform has optimized processes, worked collaboratively with all the business functions, and drove operational excellence.
Progressive reduction of 80% in calculation runtimes along with massive increase in transaction volumes in Credit and Market Risk Landscape. The strategic risk data lake continuously acquired data and performed high speed provisioning. The reference, operational and market data were used for further risk analytics & reporting at strategic, operational and tactical levels. Multiple layers were built on the platform for producing dimensional reports in Finance & CCAR.