Idea Generation

Question 1

Breadth of Ideas:

Products

Answer 1

• Assets
• Liabilities
• Operations
• Practicalities
• Environment

Question 2

Breadth of Ideas:

Stakeholders

Answer 2

• Customers
• Shareholders
• Regulator
• Employees
• Competitors

Question 3

Breadth of Ideas:

Risks

Answer 3

• Credit, CCR, Default, Model
• Market, IRR, Equity, FX
• Operational, Legal, Country, Political, ESG, Climate
• Business (+new), Strategic, Reputation, Competition
• Funding, Liquidity, Capital, Regulatory

Question 4

Control Cycle

Answer 4

• Specify Problem
• Develop Solution
• Monitoring/Feedback
• Professionalism
• External Environment

Question 5

Management Framework/Policy

Answer 5

• Governance * Roles & responsibilities, ownership, delegation of authority, oversight
• Purpose/scope * Risks/functions addressed, aim of policy, stakeholders, control framework
• Bank strategy * Alignment with objectives, constraints, support of strategic plan
• Risk appetite * Capacity for risk, align & assess metrics w.r.t. appetite, tolerances
• Regulation/legal * Prescriptions, laws, best practice, market confidence
• Specifics * Type of framework, risks/functions, links to other frameworks, A&L sides
• Identification * Identifying risks, drivers of risks/elements, steps involved
• Measurement * Approach to evaluation, informs metrics & KRIs
• Metrics & KRIs * Qualitative/quantitative, targets/hurdles
• Monitoring * Reporting & frequency, assessing compliance, escalation procedures
• Mitigation * Range of strategies, contingency plans, stress tests, management actions

Question 6

X Risk Policy - questions related to risk policy/framework

Answer 6

Considerations

• Governance framework
• Risk metrics
• Risk limits/tolerance
• Evaluation/ measurement
• Analysis of risk (size, complexity, character)
• Monitoring and control
• Planning and reporting
• Market conditions
• Strategic changes
• Earnings and capital sensitivity

Question 7

Acquisitions/Disposals/New products - questions related to “considering launching a new product etc.”

Answer 7

Strategic assessment
- Business objectives/strategy, threats and opportunities
- Risk appetite, funding and capital
- Target market, legacy systems, better owned
- Opportunity cost, alternatives
- Structure (outsourcing, joint ventures)

Financial assessment
- accounting & regulation
- price/costs & transaction costs
- quantifying value (NPV, DCF model, market value, IRR)
- financial performance
- capital and liquidity: capacity and aggregation

Practicalities
- implementation and operations
- internal policy, vetting and sign off
- regulation, jurisdiction, tax
- integration: data, systems, processes, staff, costs
- experience and expertise
- data, models, methods, assumptions

Stakeholders
- social issues (culture fit etc)
- competition (landscape, impact)
- market perception and reputation
- customer needs (new and existing)
- regulatory approval
- staff (skills, experience, remuneration, incentives)