Tier 1 Bank Leveraging the Risk Cockpit to Manage Default Fund Risk Exposure
The Challenge: A Tier 1 bank needed to effectively manage their default fund risk exposure in the context of their participation in a Central Counterparty (CCP). The bank required a tool that could help them understand the key drivers of their default fund risk, such as margin utilization of their clients, and manage associated incidents. They also wanted to drill through data to gain operational insights and tie this information back to key risks identified within their business.
The Solution: To achieve these objectives, the bank decided to leverage the Risk Cockpit, a risk management tool that provides a visual representation of the risks facing an organization. The Risk Cockpit allows the bank to track, analyze, and mitigate their CCP default fund risk exposure by providing flexible data integration and analysis functionality together with incident management.
By using the Risk Cockpit, the bank was able to easily integrate and visualize data related to their CCP default fund risk exposure. They now monitor their exposure to default fund risk in real time and take appropriate actions to manage their risk. In addition, the bank can participate in auctions that the CCP may hold in the event of a default more effectively. These auctions allow participants to bid on the defaulted portfolio of the participant, with the proceeds going to the default fund. By participating in these auctions, the bank can potentially reduce their exposure and turn a risk into a potential source of profit.
The Result: Overall, the bank is able to effectively manage their CCP default fund risk exposure and ensure the stability and resilience of the financial system by leveraging the Risk Cockpit. They can quickly identify areas of concern and take appropriate action. With the Risk Cockpit, the bank has been able to gain operational insights and tie this information back to key risks identified within their business. The tool has helped the bank manage associated incidents and make data-driven decisions to mitigate their risk. The bank is confident that they are managing their default fund risk exposure in the context of their participation in a CCP effectively.
Conclusion: In conclusion, the Risk Cockpit has provided a powerful solution to the Tier 1 bank’s default fund risk management requirements. By utilizing the Risk Cockpit, the bank is able to monitor their risk exposure in real-time, manage incidents, and participate in auctions more effectively. Additionally, the tool has provided operational insights that have helped the bank make informed decisions and manage risks proactively. The Risk Cockpit has empowered the bank to ensure the stability and resilience of the financial system while effectively managing their default fund risk exposure.
