Overview - Optimist Risk

Building a Basel II IRB Compliant Credit Framework

In today's Banking environment, there is an even greater need to conduct appropriate due diligence on Credit Exposures, to minimise lending losses and maximise portfolio profitability. Lenders now need to ensure they fully understand the associated risks before they enter into a credit transaction, and utilise that knowledge to price the loan accordingly. Recent focus on Banking Standards, such as the supervisory guidance from the Basel II Capital Accord, has created a framework for managing and controlling credit risk, through standardisation, consistency and governance in the overall Credit Process.

The Basel II Accord provides 3 varying levels of compliance, from the standardised approach through the two levels of Internal Ratings Based (IRB) approaches.

Optimist Risk delivers Basel II IRB capability

Optimist Risk provides Risk Managers and Banking Analysts with a consistent, secure, transparent and controlled environment to deliver their Internal Rating Process. By providing process efficiency, ease-of-use and greater control over governance, Risk Managers can now deploy their risk models direct into the field with minimal effort.

Optimist Risk provides an engine for implementing counterparty (Borrower) risk models using both quantitative risk factors derived seamlessly from Optimist financial data, and custom defined qualitative risk factors.

Optimist Risk allows users to build models made up from the following components...

Risk Factors

Risk factors can include both qualitative measures derived directly from Optimist financial data, such as Sales growth, Assets, Liabilities or even specific accounts, in addition to qualitative measures, such as Management Experience, Industry Strength, Business Lifecycle Stage etc. An administrator can define how they would like their qualitative risk factors presented to the end user, using common controls, such as combo-boxes, check-boxes or radio-buttons.

Risk Models

Risk Models are series of risk factors that the administrator configures and arranges, in order to compile a risk score for a particular client. Powerful workflow features allow custom path building through the various questions, using the responses provided by the end-user to determine which questions to navigate to next. In addition, using Override features, the administrator can delegate authority to specific Bank Officers, enabling them to override the system generated risk score.

Risk Grades and Probability of Default

The output of a Risk Questionnaire can easily be mapped to an appropriate overall risk grading, to support existing Bank Lending Policies. Furthermore, use of the powerful Optimist Risk formula builder can support integration of P.D. calculations into the core risk engine.

Facility Risk

Using the seamless integration points between Optimist and Optimist Risk, it is possible to use the unique Loan-Collateral Analysis Worksheet to generate accurate calculations for Exposure at Default (EAD), Loss Given Default (LGD) and Expected Loss (EL) for a given Credit Risk Exposure.