Objective

To create and maintain a global Structured Trade Review (STR) process as an independent risk management function for one of the biggest US investment banks.

CRISIL's Solution

• CRISIL completed the engagement under stringent corporate audit deadlines to review the historic inventory trades. To make the process sustainable, edit control and new deal review capabilities and process had to be established
• The workflow tool platform developed by CRISIL streamlined the review process across asset classes, facilitated centralized monitoring of trade review, provided a centralised MIS reporting and analytics platform
• CRISIL created a centralised knowledge repository for future reference and a deal library for all exotic products and review standards
• The team from CRISIL GRA executed the complex engagement according to the following timeline:
  
  • Due Diligence and Analysis
    (Kick Off)
    
    • Project team from CRISIL GRA interacts with stakeholders. System and population analysis completed for the asset classes where there is no review process
      
    • Identified competent resources to handle complex trade review across asset classes
      
    • Training and ramp up of STR team
      
  • Ramp-up and Steady State
    (6 months)
    
    • Further ramp up of team to manage the inflow of BAU trades and backlog of historical trades
      
    • Reviews increased to approximately 55 BAU trades and 60 historical trades per day
      
    • Serviced ad-hoc requests such as book transfer during strategic changes, Front office requests on booking checks, process improvement tools, and creation of web-based MIS for relevant stakeholders
      
  • Trade Review – Go Live
    (2 months)
    
    • Review for BAU commenced and other control process initiated to manage amendments to bookings
      
    • Identified historical trades and commenced review process
      
    • Covered 6 asset classes and reviewed close to 25 BAU trades and 20 historical trades per day
      
  • Current State
    (Today - 30 months)
    
    • Completed historical trade review and BAU reviews stabilised in the first year
    • Resources ramped down to handle pending queries in historical trades and manage BAU reviews including amendments
    • Reviewed around 80,000 trades; gross PV impact of the errors identified crossed 79 million USD
      

Client Impact

• Project Management
  
  • Comprehensive ownership of the STR function to cover 100% of all exotics traded globally on all asset classes including structured notes
• Risk Management
  
  • Developed the STR function from being a 'control activity' to an independent risk management function. STR review had an accuracy rate of more than 99.95%
    
• Trade Reviews
  
  • Reviewed approximately 80,000 trades with a MTM impact of more than USD 79m
    
• Resource Management
  
  • Provided flexibility by moving people across asset classes in the STR function to suit organizational and project requirements
    
• Knowledge Management
  
  • Delivered exotic products and processes training to stakeholder groups and line of business through a highly skilled pool of associates
    
• Analytical Reporting
  
  • Created workflow tools and reporting suites to provide high value analytical reporting
    
  • Developed the centralised STR workflow tool and reporting suite to enable synergies across asset classes
    
• Automation
  
  • Automated the population validation and feeds to the STR workflow tool and automated management reporting
    

Questions

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