CFO HANDBOOK
1
The impact of Solvency requirements, requirements, laws of Basel III and Integrated Reporting on the FINANCING of quoted companies and SMEs should not be as strong as we have been bee told ... especially if you have the tool you are missing.
20 points
for everything about the Value in Using IT Link of the Financial F Performances being lacking20 in the points existing for compliance with the regulatory requirement to take into account in the statement of equity, its to learn all about IT-IRM, IRM, the Link of control of the piloting of the financial own operational and operational risk data associated withnor a any Performances completingrisks the internal model without any additional equipment, Counterparty Risk change in existing IT to automate the Procedures of Integrated Management at every level of the Organization to Strengthen Cash Generating Units (CGU) and the economic [Laws of Basel III, rules of Solvency II and NAIC (US Solvency): 2010, 2012, 2013 and 2016); Capital to a confidence level of 95.5% saving of Potentially Recoverable Losses (PRL) of Pillar 3 disclosure requirements, revised revised in January, 2015 (Basel Committee); operational risk reducing ucing uncertainty and the Counterparty Risk (CCR) as required by IFRS 13 "Fair Value Assessment" in the IASB framework, in January 2013, and the modeling procedures ORSA / FLAOR of "Risks, "Risks, Opportunities and Results" Results in the Topic 820 updated up in the US GAAP, May 2011] short, medium and d long term from 1 January 2016. 2016
Very low price forr the connection of your company and its internal control functions: A special offer of test extended until the first quarterly results... I take this opportunity now!
Automation of the Interactions of Piloting of the financial Performance of internal control functions (Finance, HRM, OM) ) and Management of Counterparty Credit Risk (CCR)
A Real Time Integrated Reporting (IR) Analytical Tool to Enhance Value Creation and Ensure a common Risk Appetite within an Organization Demo on www.riskosoftcorp.com 1
Contents 2
INTRODUCTION 1/ Exclusive technology of internal audit of operational risk and counterparty risk
4
2/ The facts at the origin of innovation
4
3/ Key concepts
5
4/ Strengths and weaknesses of competitors
5
5/ Financial performance organized and automated by IT-IRM
6
6/ Technological barriers removed
7
7/ Peculiarity of the Features offered in highly secured mode SaaS
7
8/ CFO piloting system / Features complementing the existing IT
10
9/ To see what the IT-IRM provides for the piloting of financial performance
11
10/ Interaction of the Heads of Cash Generating Units (OM Function)
16
11/ Value in using IT-IRM reports
19
12/ Sociogram of interaction of the integrated reporting (triangular Communication of the stakeholders of counterparty risk)
20
13/ Legal references forcing to the triangular exchanges of counterparty risk data provided by the IT-IRM 20 14/ Compliance of the IT-IRM with the laws of Basel III and regulations of Solvency II (EU)
25
15/ Compliance of the IT-IRM with the NAIC (US Solvency):
25
16/ Industrial property (Patent)
26
17/ Valuable proposal for each of our customers
26
18/ Attractive prices in the launch phase (I take this opportunity now!)
30
19/ Publications of the EU-US scientific committee which accompanies the customer
31
20/ The EU-US scientific and technical Team
32
ANNEX
40
Sheets of subscription of the special offer of prolonged test
2
3 INTRODUCTION This handbook is intended to inform the CFO on a difficulty with which many listed companies, including banks, do not seem to have had until now other choices that to work outside laws, standards and prescribing recommendations: a) The requirement to take account of operational risk data associated with counterparty risk (see Article 286 EU legislative acts 575/2013 of 26 June 2013 in force from 1 January 2014 and the US comparable rule (1); b) The requirement to take into account the data of operational risk associated with a Counterparty Risk (Article 286, EU legislative Acts 575/2013 of June 26th, 2013 as from January 1st, 2014); c) The requirement for measuring fair value with Topic 820 updated in the US GAAP, May 2011 and the publication of the standard IFRS13 in the reference table of the IASB, applicable at the latest to the periods opened as from January 1st, 2013. So considering the situation of deficiency which prevailed up to here for the data of operational risk associated with a counterparty risk, as long as the bank is not connected to the server IT-IRM RiskoSoft, the unique device to process these data according to the accounting approach centred on the expected losses, preparers of financial statements have so far retracted the problem by proceeding directly to the probability of default calculations from CDS spreads (Credit Default Swap) for each counterparty, accessible in financial databases. This stochastic analysis approach is nevertheless authorized only on the condition of being coupled with the accounting approach centred on the expected losses (EL) or the tolerance threshold of the losses (Risk appetite): cf. “Forward looking provisioning”, paragraph 23, “Basel III: A global regulatory framework for more resilient banks and banking systems” 2010, revised in 2011 (Basel Committee on Banking Supervision).
The situation will become even more complicated from January 2016 with the coming into force of the ORSA / FLAOR procedures of Solvency II (EU) and NAIC (US SOLVENCY): •
For the inclusion of insurance, Solvency II has increased to 4.5% tolerance level of operational risk losses, which was 20% in Basel II and Basel III laws, including EU legislative Acts 575/2013 of 26 June 2013.
Operational risk is a significant risk faced by institutions and must be covered by own funds. •
Special attention should be given to taking insurance into account in the simple approaches to calculating capital requirements for operational risk (Para. 52, EU Legislative Act No. 575/2013).
The “Revised Pillar 3 disclosure requirements” effective 1 January 2015 prescribes strict rules for monitoring the compliance of banks (Basel Committee on Banking Supervision). The RiskoSoft IT-IRM is the analytical accounting tool (management accounting or firms accounting) dedicated to CFO (Chief Financial Officer) to ensure control of the steering organizational dynamics creation value associated with customer relations and address operational risk data required for the calculation of own funds. The Counterparty Risk Analyst is responsible for calculating and not of approval. The employment organization has an obligation to implement the Accounting cost indicators and monitoring system of expected losses or tolerance threshold of losses ("Risk Appetite") and provide the Counterparty Risk Analyst operational risk data dashboards to consider for stochastic calculations. This handbook will allow you to discover advanced methodological patented of the IT-IRM RiskoSoft and to acquire via our proposals of partnership the solution become essential to answer effectively the regulations and the transparency due of your partners and investors (Integrated Reporting, IR) IT-IRM can be tested directly on-line and free of charge on www.riskosoftcorp.com. Our project leaders and our partners (audit firms, university experts) are at your disposal to accompany you. Best regards.
Dr Pascal LELE (Ph.D) Director of Research, Development and Partnerships Riskosoft Corporation
[email protected] (1) Status of implementation in the US In July 2013, the Federal Reserve System (Federal Reserve) and the Office of the Comptroller of the Currency (OCC) issued final rules to implement in the United States the Basel III risk-based capital regulatory reforms and certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The Federal Deposit Insurance Corporation (FDIC) issued a comparable interim final rule in July 2013 and finalized that rule in April 2014.
3
4 1/ Exclusive technology of internal audit of operational risk and counterparty risk With the coming into force of Solvency II and NAIC (US Solvency) on January 1st, 2016, all banks, insurances companies and their risk counterparties (SME, major accounts and Government Departments) will face the problem that RISKOSOFT has the exclusivity of the solution required on the world market, the financial technology based on the interactions of Input-Output: • Operational system of cost accounting (gaps analysis) on which the company operates in real time of value creation (Riskosoft IT-IRM) and • Existing IT (Risk cartography or Risk register) and the tools of actuarial modeling or stochastic calculations. . Valuable proposal • Allow the customer to have a total capacity of Risk management with short, average and long term within the framework of the accounting approach centred on expected losses required by the laws of Basel III or centred on the threshold of appetite for the risk required by the approach ORSA / FLAOR of Solvency II (EU) and NAIC (US Solvency). Diagram of the obtained internal model • Inter-connectivity of applications of Enterprise Risk management (ERM) or Integrated Management obtained (IM) as soon as the CFO connects his company in mode SaaS on www.riskosoftcorp.com to enable internal control functions (Finance, HRM and Operations Management) to have on Excel their input interfaces of value creation interaction data processed in real time by the OLAP centers server.
Risks Data Collection
Risks Treatment
Forward-looking Provisioning Scenarios
Integrated Reporting (IR)
Internal data bases interfaced by IT-IRM Mapping or Risks Register
IT-IRM (Investor Relationship Management)
IT-IRM dashboards of cost accounting focused on operational risk and mobilization of HR are the element that was missing until now. They provide the endogenous interaction data that are particularly useful for updating the risk, particularly when the financial and social quality of an entity is deteriorating.
Stochastic calculations
XBRT or XBRL
Actuarial modeling Models predict the funds that the investor will have to pay given its own operational risk data and those of the counterparty risk
2/The facts at the origin of innovation The underlying premise of ERM (Enterprise Risk Management) is that every entity exists to provide value for its stakeholders. However, a system of information devoid of the capacity to automate the interaction of organizational dynamics processes and working groups making effective real-time auditing and internal control at all workstations will not be able to create value for the company and reduce uncertainty as required by clause 5 of ISO 31000:2009. There are many events based databases on the software market (MetricStream, RiskNav®, Risk Matrix, SAP, Oracle, SAS Institute, IBM, Microsoft, MicroStrategy, etc.) that feed Business Intelligence tools with operational risk data collected on the Web and used for decision making on the basis of stochastic calculations. However, employers and internal auditors of SMEs, big accounts and government administration have fewer opportunities to plan, process and integrate this data into their business plan and periodic reporting of historical cost and the accumulated data gaps of operational risk indicators stored in the internal data warehouses for their business plan, in particular to supply data of projected management of the value creation, reducing uncertainty on the Return one Investment (ROI).
•
All companies are affected, because it concerns economic capital and asset management.
4
5 Economic capital is the amount of capital the firm should have to support any risks it takes on (a passport for taking on risks): •
Risk measurement must be translated into capital requirements according to the quality of the measurement and management system.
3/ key Concepts •
Operational risk is defined as the risk of loss resulting from inadequate or failed processes, people and systems or from external events. This definition includes legal risk, but excludes strategic and reputational risk.
•
“The risk that the counterparty to a transaction could default before the final settlement of the transaction’s cash flows; an economic loss would occur if the transactions or portfolio of transactions with the counterparty has a positive economic value at the time of default”
4/Strengths and weaknesses of competitors a) What make the competitors? • Actuarial mathematical calculations (statistics and probability) of the VaR (Value at Risk) solely on the basis of unexpected data losses (UL) recorded by the internal database (risk mapping) and loss events collected on the Web. The difference with the existing processes or procedures is that decision making was limited to the application of stochastic methods within the finance function. To calculate cash flows expected from an asset, all the hypotheses of the realization of cash flow are envisaged and each hypothesis is associated with a probability of realization: -
The expected value is a mathematical probability of flows updated based on historical data.
This stochastic analysis approach is no longer authorized only if it is coupled with the accounting approach expected losses (EL): •
“Forward looking provisioning”, § 23, “Basel III: A global regulatory framework for more resilient banks and banking systems” 2010, revised in 2011 (Basel Committee on Banking Supervision);
•
EU legislative acts 575/2013 of 26 June 2013: "Given the nature and magnitude of unexpected losses (UL) experienced by institutions during the economic and financial crisis, it is necessary to improve and further harmonize the obligations applicable capital these establishments” (§ 72).
•
Estimates of future cash flows (inflows and outflows) must reflect the cost savings and other benefits ... based on the budgets / forecasts most recent financial "(§ 47, IAS 36);
•
A reversal of an impairment loss on a revalued asset is credited directly in the assets (§ 120, IAS 36);
•
Financial Accounting Standards Board (FASB): any company with US-GAAP based financial statements is expected to comply with SFAS 144, now known as ASC 360: notably recognize potentially recoverable losses of an asset or group of assets when operating or cash flow recently combined with a history of operating losses or a projection or forecast demonstrates continuing losses associated with the long-term use of the asset or group of assets (Financial Accounting Standards Board).
b) Equation of the process of cost accounting required: •
Expected Losses (EL) = VaR (UL + Cumulative gaps of the income statements of the last 5 years) PRL (Potentially Recoverable Losses) = % Risk Appetite
This is what require the prudent regulations since Basel II and taken up by Basel III, Solvency II and NAIC for the operational risk, and that Riskosoft IT-IRM is alone to make by the accounting approach centred on the expected losses and the cost savings measuring the economic capital.
5
6 c) Part of the IR that must be quantified by the “reference risk measure”: The “reference risk measure” should be understood as the Value-at-Risk of the basic own funds subject to a confidence level of 99.5% over a one-year period as set out in Article 101-3 of Solvency II: •
Regardless of the country, CFOs are blocking on the elements of "Risks, opportunities and results" [Risks and Opportunities, Performance and Outlook].
This aspect of the IR is in clause 5 of the standard ISO 31000 (Risk treatment: accounting processes upstream to the mathematical or actuarial calculations); the environmental aspect and SCR (Social Corporate Responsibility) is of the standard ISO 26000. d) Interaction is the base of Enterprise Risk management (ERM). An information system that focuses solely on the nominal layout and structure of the functions available is disconnected from risk management and corporate governance. This is more or less typical of the current situation whereby IT is indiscriminately dedicated to every function. The interaction is the essential constituent of all operational systems. The methodology that is missing for the interaction to the meaning of social psychology: •
The interaction occurs when two or more objects have an effect on one another. The idea of a two-way effect is central to the concept of the interaction, as opposed to a unidirectional causal effect. The term refers to the interconnectivity (interactions within systems).
All the elements of a system are interrelated and interdependent. Every action has a consequence on the behavior of actors and, therefore, part of the process of decision making, where the notion of structured decision-making based on data from operational risk associated with the Counterparty Credit Risk (CCR): •
With computer modeling and process automation interaction operational management became possible.
5/ Financial performance organized and automated by IT-IRM a) Bases to estimate the VaR & PRL before the calculations used for programming the OM •
The data of indicators of operational losses collected since almost 40 years by the socioeconomic analysis in 32 countries on 5 continents have established sectoral average losses: the impact of operational risk losses on performance was confirmed by the data collected by the Risk Management Group of the Basel Committee.
Term of performance
Requirement of potentially recoverable losses
Level of risk appetite or losses tolerance
Part of the cost savings strengthening the economic capital
Part of cost saving strengthening the workers’ variable compensation
3 years
95,5% of VaR
4,5%
67%
33%
VaR (Value at Risk) = Unexpected losses (UL) + Expected losses (EL) A- Industry and Services: loss averages of operational risk by employee and a year = $ 21 285 B- Banks and Insurances companies : loss averages of operational risk by employee and a year = $18 000 C- ORSA or FLAOR of the insurer: data of calculations of the scenarios of forwardlooking provisioning to demonstrate that the insurer covers the operational risks at a probability level of 99.5% over one year
A+B
6
7 b) Projected management of the operational performance It is based on the interaction of the finance function with the management of operations by the activity of the Cash Generating Units (CGU) whose managers or team leaders are equipped with dynamic dashboards (tables with capacity of Gap Analysis by their SaaS connection with the center of the OLAP server). - IAS 36 defines cash-generating units (CGU) as the smallest identifiable group of assets which generates entrances of cash widely independent from entrances of cash generated by other assets or groups of assets. To ensure alignment of real-time operations of each workstation on the costs saving objectives: •
The Operations Management function (OM) is configured to measure for up to eight lines of business by the finance function at the time of account opening of the Intranet IT-IRM SaaS of the company;
•
The OM function delegates the performance management to team leaders who coordinate the activity of employees (Maximum 20 employees for a team leader);
•
Each team leader registers in advance on their account IT-IRM the list of employees under its responsibility and access the registration forms of daily data to be processed by the server to measure performance on absenteeism, quality defects, work accidents, direct productivity gaps (overtime and additional costs of operations) and Gaps of know-how (skills gaps including lack of versatility).
c) Structured decision-making The actuarial model of risk appetite adopts a structured decision-making approach using operational risks identified from the data treated by the cost accounting approach to provide threshold control and valuation based on cost accounting data in the Integrated Reporting (IR) context. To achieve this goal, stakeholders must first address the lack of automation of integrated Enterprise Risk Management in perspective of "Risks, Opportunities and Results" as prescribed by the International Integrated Reporting Council (IIRC). This automation should consist of the synchronization of the internal control functions (Finance, HR and Operations Management) with the modules of the IT-IRM. These functions that drive the system of global dynamics of the organization must be articulated in real time in the value creation operations. IT-IRM addresses the IR problem and the worldwide problem of cost savings. The new regulations require that this should be handled by the identification of the organizations’ risk appetite and control of the threshold drawn-up to meet this. 6/ Technological barriers removed The difference with the existing processes or procedures is that decision making was limited to the application of stochastic methods within the finance function. To calculate cash flows expected from an asset, all the hypotheses of the realization of cash flow are envisaged and each hypothesis is associated with a probability of realization: -
The expected value is a mathematical probability of flows updated based on historical data.
This stochastic analysis approach is no longer authorized only if it is coupled with the accounting approach expected losses (EL): •
Given the nature and magnitude of unexpected losses (UL) experienced by institutions during the economic and financial crisis, it is necessary to improve and further harmonize the obligations applicable capital these establishments (Paragraph 72, EU legislative acts No. 575/2013 of 26 June 2013).
IT-IRM is an exception in the world of risk management. No other application has so far been built for such a purpose to reduce uncertainty on creating value through programming and real-time control of economic capital and variable pay.
7
8 Also no other applications exist for structured decision-making based on data handled of "Risks, Opportunities and Results" to meet Integrated Reporting elements: "Risks and Opportunities" (IR 4), "Performance" (IR 6) and "Outlook" (IR 7). •
It is indeed about the aspect IRM (Investor Relationship Management) of the decision-making "or business intelligence" (BI) that must provide the investor evidence of ERM (Enterprise Risk Management).
The problem of Enterprise Risk Management (ERM) was noted before the promoter of the IT-IRM filed a patent on the cost accounting approach of expected losses (EL). While by the standard IAS 36 revised in 2004, the IASB had left the choice for the valuation of assets and liabilities, the notion of fair value (valuation based on an estimate of market value) or CGU (Cash Generating Unit) value-inuse by estimating its net future value (including the disposal value, if the asset has been impaired), application providers affirmed the following, they were unfamiliar the methodology of the operational processes: •
If you have a big business process, but no ERM software of support, you are condemned to fail; if you have good ERM software but the bad business processes, you are also condemned to fail (Steve Apfelberg, sales manager of SIEBEL. Source: (Barney Beal, SearchCRM.com Writer, 09 sept. 2003).
•
A decision-making system does not replace the operational systems which put on the company, but it comes to become integrated into it, by extracting data there to spread the knowledge, in a most exploitable way by the concerned persons. … A decision-making platform is the key element for the analysis, the simulation and the optimization of the performances of the company (SAS Academic / The power to know: http://joomla.masters.epita.net/system/files/News/SemaineThematique-SAS1.pdf).
•
What is missing is not the technology, but the methodology. Until the business processes are encircled, the ERM will remain a solution in search of a problem (Source: Garry Kranz, SearchCRM.com Writer, and 25 March 2004).
It took the subprime crisis so that we understand the importance of Siebel's warning: -
Mathematical effectiveness depends on the quality of data which feed the calculation tools.
The margin of error can be very large if the data is not the real and/or complete data of the company: -
Basel III, Solvency II and NAIC, have highlighted the need to measure the solvency of a financial institution, taking into account the processed data from operational risk of the organization and that associated with a credit counterparty (credit counterparty risk - CCR).
The discovery of the methodology required to automate the processes of ERM by RISKSOFT (the interaction of the internal control functions in real time to synchronize any operations of value creation with regard to the tolerance threshold of the losses), led to a modification of the conventional technology to pass, under clause 5 of ISO 31000: 2009, which is a system of structured decision making on the basis of processed data risk operational in the framework of the new regulation [IAS 36 and ASC 360 /US GAAP, laws of Basel III, Solvency II (EU) and NAIC (US Solvency)]. It is question of completing the traditional mathematical model called "engineer system" by the cost accounting model IT-IRM says "manager system" under management accounting or corporate accounting (the operating system that runs the company, as desired by SAS Institude in the debate with Siebel). This is also the sense of ISO 31000: 2009: •
Abandoning the vision of the engineer who said, "the risk is the combination of event probability and its consequence" for the risks associated with the organization's goals: "the risk is the effect of uncertainty on goals".
In other words, the risk management framework should be integrated into decision-making and organization of all company activities, ensuring internal and external contexts, the responsibilities and the resources available at strategic and operational level.
8
9 We classify the tools of the engineer system into five categories: •
Strategic and Capability Risk Analysis— Focuses on identifying, analyzing, and prioritizing risks to achieve strategic goals, objectives, and capabilities.
•
Threat Analysis - Focuses on identifying, analyzing, and prioritizing threats to minimize their impact on national security.
•
Investment and Portfolio Risk Analysis——Focuses on identifying, analyzing, and prioritizing investments and possible alternatives based on risk.
•
Program Risk Management——Focuses on identifying, analyzing, prioritizing, and managing risks to eliminate or minimize their impact on a program's objectives and probability of success.
•
Cost Risk Analysis - Focuses on quantifying how technological and economic risks may affect a system's cost. Applies probability methods to model, measure, and manage risk in the cost of engineering advanced systems.
The basic steps of the engineer system are summarized as follows:
Cf. MITRE, Risk Management Tools, September 2013 The scheme BI (Business Intelligence) of Classic decision making (MetricStream, RiskNav®, Risk Matrix, SAP, Oracle, SAS Institute, IBM, Microsoft, MicroStrategy, etc.) resulting from the engineer system is shown in Figure below. •
The “Decision-makers using state generators (BO, Excel, etc.)” aspect is the point at which IT-directed IRM innovation lies.
9
10
In this architecture, there is a data warehouse that centralizes data from multiple sources [production base of the company, text files, web documents (e.g., HTML, SML, and SGML). These data are merged into a large database (e.g., SQL server, Oracle). Data are then extracted and analyzed by OLAP servers as data cubes (Analysis Server, Essbase). Finally, statistical reports are generated (e.g., Microsoft Excel, Business Objects, Crystal Reports) to present the study to the end users who make decisions (e.g., marketing analysts). This mode of analysis is misadvised without the preliminary accounting treatment (Agreement of Basel III) considering the nature "costs hidden" of indicators of operational risk. The new regulations (Laws of Basel III, Solvency II and NAIC) require that special attention should be paid to the hidden costs of dysfunctions or unexpected losses [Cf. typology of events of unexpected losses (UL), article 324, legislatives Acts N ° EU 575/2013. •
It is thus with the data supplied by the IT-IRM that the stochastic calculations of the capital of cover operational risks will be more reliable, thus also the capital of cover Counterparty Credit Risk (CCR).
7/ Peculiarity of the Features offered in highly secured mode SaaS Application of Piloting of the financial Performance by the real time synergy without encroachment of the domains of responsibility: •
automation of interactions in real time audit or internal control functions (Finance, Human Resource Management and Operations Management);
•
analytical tool of cost accounting in compliance with the laws of Basel III, Solvency II (EU) and NAIC (US Solvency) based on what they have in common (Clause 5 of the ISO 31000: 2009 / Risk Treatment) to exploit the data stored by mapping or risk registers in the internal database, to improve the real-time creation of value and maintain the same level of risk appetite (Risk appetite) or expected loss threshold in an organization.
8/ CFO piloting system / Features complementing the existing IT The appropriate system of management accounting (cost accounting and business accounting) is called "internal model": the International Association of Insurance Supervisors (IAIS) defines the internal model as "a risk measurement system developed by an insurer to analyze the overall position risk, quantify the risks and determine the economic capital required for such risks". Technological progress in IT-IRM is based on solving the problem of interaction of internal control functions (Finance, Human Resources Management and Operations Management) for structured decision-making based on processed data of operational risk losses in real-time by human resources in frontline. The IT-IRM automatically measures by gaps analysis the value created in real time on each of the five indicators (factors or root causes of operating losses) at all workstations. These are value-creation levers on which each staff member can act in real time. 1
11 IT-IRM provides custom configurable dashboards by organizations of all sectors to build an internal model (Intranet) to automate interactive processing of cost savings of operational risk. The dashboard allows for storing data to be considered for IR contents "Risks and Opportunities", "Performance" and "Outlook" (Risks, Opportunities and Results). •
By simple connection to the server IT-IRM, without any installation and without changing anything in the existing, three types of applications are articulated in the order below to set up the custom-made configurable internal model in SaaS fully secured (100 %) by the system of the centers OLAP on EXCEL:
a) Applications for the interaction of the finance function : -Module IT-IRM M1/Plan of Performance; -Module IT-IRM M6 /feedback Dashboards for integrated reporting. The CFO intervenes once a year: the first year to enter the data of the 3-year plan performance targets (Transfer of operational risk event data recorded by risk mapping and data accumulated gaps of accounts management of last -5 years); once one year later to seize the data updating of the plan of performance (Data realized of management accounts data of realized exercise). b) Applications for the HRM interaction (HR motivation and mobilization by the "Corporate Dialog" / decentralized in real time at the work posts) -Module IT-IRM M2/ Employee Satisfaction -Module IT-IRMI M5/ Psychosocial Risks.
c) Applications for the interaction of Operations Management function (Business Lines) -Module IT-IRM M3 / Cost savings (Measurement of the value created in real time by the gap analysis) -Module IT-IRM M4 / Performance Bulletins (codes are assigned to each member of staff to monitor its performance indexed to 5 operational risk indicators: levers on which the employee can act in real time).
9/ To see what the IT-IRM provides for the piloting of financial performance •
Free Demo on www.riskosoftcorp.com
Schematic overview of the internal model custom configured by the CFO: •
Automatic orchestration patterns of organizational dynamics or synergistic value creation in real time:
1
12 A / Diagram of highly secured interactions by the system OLAP centers
B/ Risk associated with IT-IRM The system security is based 100% on non direct access from client to server and non communication of data by email: • A human operator intervenes to activate the request processing the client address to the server from its ITIRM interface; After about 6 minutes the data is placed on the customer's IT-IRM Intranet account and archived in the database; • In case of intense activity (massive clients’ requests) the operator of the OLAP center is assisted or supplemented by a Builder Robot Controller (mining and extraction of data). So IT-directed IRM contains no specific risk; IT-IRM is a SaaS (Software-as-a Service) for online transaction processing data by a state generator. IT-IRM states generator is used to present the results of the analysis for end users or decision makers as performance states. To ensure traceability of data and analysis, IT-IRM uses Microsoft Excel spreadsheets which the managers and the financial directors usually use without risk. The scenarios modeling interface is of as easy as numerous actuaries use Excel. A scenario is a set of values that Excel saves and the user can automatically replace in the cells of a spreadsheet. Three types of tools included with Excel allow relaying IT-IRM reports: •
Scenarios,
•
Data Tables and
•
Target value.
1
13 C/ Risks Dashboard used by the CFO to transfer data from risk register in the IT-IRM:
Table of transfers of loss events in IT-IRM for treatment • Identify and quantify the operational risks events and operational risk losses in touch with the other risks: CFO transfers the data once for 3 year plan and IT-IRM automatically readjusts forecasts during the period (Example of the insurer)
Assessment Cost
%
Particular attention should be paid to the hidden costs of malfunction or unexpected losses events • The Basel Committee has adopted a classification that establishes seven categories of events related to these risks [Cf. typology of events of Unexpected Losses (UL): Article 324 / EU legislative acts No. 575/2013 and similar articles in US Dodd-Frank Act of 2010, the OSFI Act of Canada in December 2012, etc.]: 1. Internal fraud: for example, inaccurate information on positions, forgery, theft by an employee and insider trading by an employee operating on its own account. 2. External fraud: for example, robbery, forgery and damage due to hacking. 3. Practices in employment and safety at work: for example, workers' compensation claims, breach of health and safety of employees, union activities, discrimination claims and liability in general. Operational Risks 4. Clients, products and business practices: for example, breach of fiduciary duty, fraudulent use of confidential customer information, improper stock transactions on behalf of the bank, money and selling unauthorized products laundering. 5. Property damage: for example, terrorism, vandalism, earthquakes, fires and floods. 6. Malfunction of business and systems: for example, failures of computer hardware and software, telecommunications problems and blackouts. 7. Execution, delivery and process management: for example, data recording error, failures in collateral management, gaps in legal documentation error to access the accounts of customers and supplier defaults or conflicts with them . Health underwriting risk
The risk arising from the underwriting of health insurance obligations
Counterparty risk
Events of losses arising from a counterparty default (borrowers); hence the importance for banks and insurers to screen their clients and borrowers to use internal scoring methods.
Market Risk
Events of losses arising from adverse movements in the prices of assets held.
Underwriting risk life
Underwriting risk non-life
Event of risk arising from an inaccurate assessment of the risks entailed in writing an insurance policy, or from factors wholly out of the underwriter's control. As a result, the policy may cost the insurer much more than it has earned in premiums. Events of risk of loss arising from adverse changes in the value of insurance liabilities, due to inadequate pricing and provisioning assumptions.
Total
1
14 D/ Diagram of the relation between client and server of the center OLAP •
IT-IRM data processing scheme transactions and delivery of results is the following:
1
15 9-2 / Diagram of automated interactions of the HR function •
Two independent modules: M2 (Social Dialog) and M5 (Psychosocial risks).
Work teams' cohesion and the consensus on the objectives are the determinants of the efficiency and competitiveness of the organization: -
IT-IRM/M2 is the module of control mobilizing by the ICT all company employees regardless of the number and national or international locations on the cost saving and capital optimization plan.
-
The effects of computerized social dialogue for the direct expression of each employee with a few clicks on its confidential IT-IRM Interface are measured in real time by the dynamic dashboards of M3 module (cost saving) of the function Operation Management (OM) on the basis of weighting rates provided by the M2 module of the HRM that calculates the median position for priority actions.
The Social database 1 of the M2 module provides satisfaction / dissatisfaction report to evaluate the adherence of all categories of employees. These data allow to automatically scheduling the steering mobilizing employees to form the front line on the basis of six key domains of socio-economic improvement: -
Each domain is automatically linked to a lever indicator on which each employee acts in real time to improve performance. The weighting system to evaluate the performance and variable compensation is also made on the basis of values provided by the satisfaction / dissatisfaction survey of employees. The HRM system interaction scheme is this one: Diagram of the leverage of operational risk indicators that each employee mobilized by HRM can act to improve financial performance and working conditions Operational risk indicators on which every Key domains of socio-economic
employee can act in real time to reduce the
improvement
losses and contribute to the improvement of the working conditions
Weighting rate calculated on the median position
1
Working conditions
Work accident
Priority level score
2
Organization of work
Quality defects
Priority level score
Consultation, 3
Communication,
Gaps of know-how
Coordination (3C)
(skills gaps including
4
Integrated training
5
Working time management
Priority level score
lack of versatility)
Absenteeism
Priority level score
Gaps of direct productivity 6
Strategic implementation
(overtime and
Priority level score
additional operational costs)
1
16 B / Module M5 of stress prevention and anticipation of psychosocial risks It should be noted that the purpose of the analysis of automatic tests IT-IRM is to quantify the stress in order to identify problem areas. The online survey is anonymous and therefore no therapeutic purposes. The report allows management to improve its methods, but it can also allow the working medicine to initiate a relationship approach more targeted assistance. With the module 5 of IT-IRM, researches on «the causes of stress» in a structure begin with a meticulous analysis of the various axes bound to the stress in the work (*): • Axis 1. Requirements in the work; • Axis 2. Emotional requirements; • Axis 3. Autonomy or margins of operation; • Axis 4. Social relationships or the relations in the work; • Axis 5. Valuable conflicts; • Axis 6. Insecurity of the employment and the salary (*) These zones of exploration were defined by the group of American, Canadian, English, German and French experts, etc. gathered in Paris by Minister for Labor (Cf. " Measure the psychosocial factors of risk in the work to master them": Report of experts' Committee on the follow-up of the psychosocial risks in the work), in April of 2011.
10/ Interaction of the Heads of Cash Generating Units (OM Function) •
IAS 36 defines Cash-Generating Units (CGU) as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
To assure the alignment of the real time operations of every workstation on the objectives of cost saving, the Operations Management function is configured to measure for maximum eight lines of activity by the function finances at the time of the opening of the Intranet account IT-IRM SaaS of the company.
10-1/ Indicators of the monthly reports of cost saving and of variable compensation •
The financial statement on realized cost savings and the bulletin of on-line follow-up of the impact of the employee on the value creation and the improvement of the variable pay (foundation of economic parameters) are supplied by the Module M3 / Cost savings (The module of interaction of Operations Management used by the team leaders (Cash-Generating Units leaders).
a) Every team leader creates its user account on the web site www.riskosoftcorp.com. He registers beforehand the list of employees under his responsibility and reaches the forms of recording of the daily data to be treated. It is about five factors or causes at the origin of the losses of operational risk on which every employee has the power to act. •
Absenteeism,
•
Quality defects,
•
Occupational accidents,
•
Gaps from direct productivity (overtimes and additional costs of operations) and
•
Gaps from know how (Among which the development of the versatility).
Operational risk indicators are additive; the one entails the others: •
Operational risk management fails when it focuses on a single indicator.
1
17 Data treated by the server of the centre OLAP (Online Analytical Processing) are distributed by indicator and by employee of the line of activity in proportion to their contributions to the cost savings on each indicator: •
The server calculates automatically the part of cost savings strengthening the capitals (67 %) and the part strengthening the variable compensation (33 %).
The distribution is based on experienced thresholds in social psychology laboratories. These are the thresholds at which a reward is perceived as significant and raises the expected behavior and the thresholds at which a reward is perceived as insignificant or as an attempt to manipulate or corruption if it is too high. The effets are zero in both cases. •
The commitment of employees is up when they know the budget base of potentially recoverable losses and can monitor and control their allocated share.
•
In addition, the budget of variable salary is in the requirement of alignment of ' variable compensation and risks, and effective oversight of compensation, including the overall remuneration management and total compensation of an employee.
Every operational risk indicator is articulated in a key domain of improvement of the working conditions.
b) Automatic distribution of realized saving by key domains of socioeconomic improvement: •
Cost savings realized on the key area "Management of working time". Indicator of control: absenteeism.
•
Cost savings realized on the key domain “Work organization”. -
•
Cost savings realized on the key domain “Working conditions”. -
•
Indicator of control: Occupational accidents.
Cost savings realized on the key domain “Strategic Implementation”. -
•
Indicator of control: Quality defects.
Indicator of control: Direct Productivity gaps.
Cost savings realized on the key domains “3 C (Communication, Coordination and Consultation) and the integrated training”. -
Indicator of control: Know-how gaps.
10-2/ Dynamic dashboards of Cash Generating Units (CGU) The dashboards of the team leaders measure automatically by their connection with the server of the center OLAP, the value created in real time on each of the indicators (factors or cause at the origin of operating losses) in all the posts. The process is based on the principles well known below of cost accounting: -
A gap that is difficult to identify is hardly usable.
-
Employees and persons in charge must be motivated to reduce their costs.
-
Employees must have the means to act to reduce the amount that is imputed to them.
-
Any gap must be connected with a socioeconomic indicator—the lever on which every employee can act.
1
18 10-3/ Reporting of projected management of the performance Supply the data of analysis and measure of the impact of the not financial results bound to the human resources and the governance on financial results (charged sales). IT-IRM supplies two types of processed data: -
For a concise integrated reporting, it supplies the dashboard of synthesis of the data of cost savings of the company and the dashboard of synthesis of the performances of the company on every indicator of control of the value creation (factors or causes of operational risk).
-
For the transparency, IT-IRM supplies the dashboard of performance by line of activity, by team and by employee (on-line bulletin of performance).
See below for example, synthetic dashboards of cost savings of the company.
a) Automatic distribution of the economic profit to lines of activities given their performance on each indicator: •
The server calculates automatically the part of cost savings strengthening the capitals (67 %) and the part strengthening the variable compensation (33 %) Expected savings
Savings Gap
Gain cash
Premiums
Gain cash
Gain cash
b) Performance by Operational risk indicator Expected savings
Savings
Indicators
Gap Premiums
Gain cash
Gain cash
Premiums
Absenteeism Quality defects Work accident Gaps of direct productivity (overtime and additional operational costs) Gaps of know-how (skills gaps including lack of versatility) Total
1
19 Capital (SCR) optimization c) Automatic distribution of 67 % of cost saving realized in the SCR by risk (Example of the insurer) %
Amounts of cost savings
Operational Risk
Health underwriting risk related to operational risk
Counterparty risk related to operational risk
Market Risk related to operational risk
Underwriting risk life related to operational risk
Underwriting risk non-life related to operational risk
11/ Value in using IT-IRM reports IT-IRM dashboards provide three reports which are particularly useful for updating the Risk profile and the Calculation of the rates of Insurance allowances, especially when the financial and social quality of the counterparty risk (including credit risk) is deteriorating: •
The financial report on realised cost savings (foundation of economic parameters),
•
The social report on the improvement of working conditions (foundation of social parameters 1),
•
The social report on the state of psychosocial risk (foundation of social parameters 2).
These reports are forwarded to the CFO for review with external auditors and the US Sarbanes-Oxley Act compliance team (where applicable). The results of these independent reviews need to be effectively communicated to executive management and the board of directors and more important, to the stakeholders for market transparency (Stakeholders Reporting Interactions required by Pillar 3 of Solvency II/Disclosure & transparency: improve market discipline by facilitating comparisons and Regulatory reporting requirements). Given the requirement to take account of operational risk loss of a counterparty credit risk (CCR), the sociometric diagram showing the integrated reporting interaction strengthening the mutual interests of stakeholders is this one with the IT-IRM:
1
20 12/Sociogram of interaction of the integrated reporting (triangular Communication of the stakeholders of counterparty risk)
SMEs, Major Accounts and Government Departments
Banks
Insurers
13/ Legal references forcing to the triangular exchanges of counterparty risk data provided by the IT-IRM •
Although Solvency II and NAIC rules differ for Europe and U.S, the National Association of Insurance Commissioners (NAIC), Solvency II Capital Requirement Directives and Basel III requirements and recommendations (U.S. Dodd-Frank Act of 2010, EU Legislative acts CRD4/CCR No 575/ 26 June 2013, OFSI Act of Canada of Dec. 2012, etc.), have in common the treatment requirement of Operational risk data in reference of the clause 5 of the Standard ISO 31000: 2009.
Two normative regulations were published in the effect of exchanges of the data of risk of counterparty. The stringent prudential standards for banks communication: "Revised Pillar 3 disclosure requirements”, Basel Committee on Banking Supervision, January 2015; •
The Basel Committee on Banking Supervision's mandate is to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability.5 The Committee’s work agenda has thus revolved around four key themes: (i) completing the post-crisis reform agenda; (ii) focusing on implementation efforts; (iii) reviewing the balance between simplicity, comparability and risk sensitivity of the framework; and (iv) enhancing supervisory effectiveness (cf. Implementation of Basel standards: http://www.bis.org/bcbs/publ/d299.pdf )
2
21 The binding Accounting standards of communication for all the Risk counterparties •
The IASB and FASB published May 12, 2011 an evaluation guide to fair value measurement disclosures in notes to financial statements. This guide is developed in IFRS 13 "Fair Value Assessment" in the IASB's repository in force since 1 January 2013 and an update of Topic 820 in US GAAP.
13-1/ The stringent prudential standards for banks communication: Banks must publish their Pillar 3 report in a standalone document that provides a readily accessible source of prudential measures for users. The Pillar 3 report may be appended to, or form a discrete section of, a bank’s financial reporting, but it must be easily identifiable to users: •
Banks or supervisors must also make available on their websites an archive (for a suitable retention period to be determined by the relevant supervisor) of Pillar 3 reports (ie quarterly, semi-annual or annual) relating to prior reporting periods.
•
A bank’s Pillar 3 report must be published concurrently with its financial report for the corresponding period.
A/ Guiding principles for banks’ Pillar 3 disclosures Banks must meet five guiding principles for the third pillar. Principle 1: Disclosures should be clear •
Disclosures should be presented in a form that is understandable to key stakeholders (ie investors, analysts, financial customers and others) and communicated through an accessible medium.
•
Related risk information should be presented together.
Principle 2: Disclosures should be comprehensive •
Disclosures should describe a bank’s main activities and all significant risks, supported by relevant underlying data and information. Significant changes in risk exposures between reporting periods should be described, together with the appropriate response by management.
•
Disclosures should provide sufficient information in both qualitative and quantitative terms on a bank’s processes and procedures for identifying, measuring and managing those risks.
•
Approaches to disclosure should be sufficiently flexible to reflect how senior management and the board of directors internally assess and manage risks and strategy, helping users to better understand a bank’s risk tolerance/appetite.
Principle 3: Disclosures should be meaningful to users •
Disclosures should highlight a bank’s most significant current and emerging risks and how those risks are managed, including information that is likely to receive market attention.
•
Where meaningful, linkages must be provided to line items on the balance sheet or the income statement.
Principle 4: Disclosures should be consistent over time • Disclosures should be consistent over time to enable key stakeholders to identify trends in a bank’s risk profile across all significant aspects of its business. • Additions, deletions and other important changes in disclosures from previous reports, including those arising from a bank’s specific, regulatory or market developments, should be highlighted and explained. Principle 5: Disclosures should be comparable across banks • The level of detail and the format of presentation of disclosures should enable key stakeholders to perform meaningful comparisons of business activities, prudential metrics, risks and risk management between banks and across jurisdictions.
2
22 B/ Tables and templates of bank counterparty risk fed by the data provided by IT-IRM dashboards
Tables and templates Overview of risk management and RiskWeighted Assets (RWA)
Fixed format
OVA – Bank risk management approach
OV1 – Overview of RWA
Flexible format
Quarterly
Semi annually
x
x x
Annually
x
LI1 – Differences between accounting and regulatory scopes of consolidation and mapping of financial statements with regulatory risk categories
x
x
LI2 – Main sources of differences between regulatory exposure amounts and carrying values in financial statements
x
x
LIA – Explanations of differences between accounting and regulatory exposure amounts
x
x
CCRA – Qualitative disclosure related to counterparty credit risk
x
x
Linkages between financial statements and regulatory exposures
Counterparty credit risk
CCR1 – Analysis of counterparty credit risk (CCR) exposure by approach
x
x
CCR2 – Credit valuation adjustment (CVA) capital charge
x
x
CCR3 – Standardised approach of CCR exposures by regulatory portfolio and risk weights
x
x
CCR4 – IRB – CCR exposures by portfolio and PD scale
x
x
13-2/ The binding Accounting standards of communication for all the Risk counterparties •
IFRS 13 "Evaluation of fair value" in the IASB framework;
•
Topic 820 updated in US GAAP
A/ The fair value The fair value is defined as the price that would be received in connection with the sale of an asset, or the price that would be paid to transfer a liability in a transaction concluded in normal conditions by stakeholders market on the date of the evaluation. This is an exit price. fair value is the financial value calculated using a mathematical model usually based on a calculation of present value. The current value corresponds to the future cash flows related to the assessed financial instrument. •
Under IAS 39, derivatives, assets and liabilities are valued beings at fair value at each date of the financial statements. So, is there any type of OTC financial instruments ("The Counter Owner") for hedging purposes?
With IAS 39, the "fair value", estimated from market data as soon as they are available (called "Mark-to-Market"), so do not take into account the counterparty risk (default risk). If the counterparty fails, the holder of the financial instrument will not be delivered as the contract provided
2
23 B/ Corrections introduced by IFRS 13 and Topic 820 of the US GAAP As Topic 820, IFRS 13 "corrects" this "defect" to integrate into the concept of risk of default of the counterparty in a revaluation of the financial instrument (IFRS 13, §.56). Specifically, IFRS 13 and Topic 820 propose to apply the calculated fair value adjustment which is: •
Or negative, called CVA ("Credit Value Adjustment") and from reducing the value of the financial instrument of the risk of counterparty credit market value;
•
Or positive, referred to as DVA ("Value Debit Adjustment") and from increasing the value of the financial instrument of the market value of its own credit risk for its counterparties.
IFRS 13 and Topic 820 needed for it to favor the use of observable data (IFRS 13 §.56). As there was no other possibility, preparers of financial statements have always calculated the probability of default based on CDS spreads (Credit Default Swap), for each counterparty risk, accessible in financial databases. Thus, since 2013, given the situation that prevailed waiting far for operational risk data associated with a counterparty risk, major European banks have desired to isolate the negative impact resulting from the application of this new standard at the publication of their quarterly accounts, •
They created a new intermediate management balance entitled "Net income excluding revaluation of debt and the impact of the implementation of IFRS 13 (CVA / DVA)".
C/ Adjustment difficulties to overcome by the CFO Since the entry into force of the laws of Basel III in 2010 for the United States in 2012 for Canada and 1 January 2014 for the European Union, followed by Solvency II (EU) and NAIC (US Solvency) on January 1 2016, the requirement to take into account the operational risk data associated with a counterparty credit risk (Article 286 EU legislative acts No. 575/2013 of June 26, 2013) can not be retracted by the shortcut of probabilities. Moreover, the "Pillar 3 disclosure requirements", revised by the Basel Committee on Banking Supervision in January 2015 have prescribed strict supervision rules: •
The approach by stochastic analysis (Statistics and Probability) is permitted only if it is coupled with the accounting approach expected losses (EL) or tolerance of losses (Risk appetite): cf. . Basel Committee on Banking Supervision "Basel III: A global regulatory framework," 2010, revised document in 2011.
•
In addition to the inclusion of insurance, Solvency II has increased to 4.5% tolerance level of operational risk losses, which was 20% in Basel II and Basel III laws: To be consistent with the approach ORSA / FLAOR, an insurance company must demonstrate that the level of capital is sufficient to cover operational risks at a probability level of 99.5% year on year -
-
D/ Using the accounting treatment tool of economic capital to overcome the difficulty Preparers of financial statements calculating, line by line, the credit risk of the market value (more or less) to determine a consolidated comprehensive income to record accounting under IFRS 13 and Topic 820 / US GAAP:
•
On the one hand, should no longer evade the accounting approach required by ASC 360 and IAS 36 standards, because the company is not connected to the IT-IRM Server does not have the operational risk of data processed, to go directly to the probability calculations;
•
Secondly, they must take into account the operational risk data associated with a counterparty risk.
2
24 In addition, the amendments to IAS 36 titled "Information on the recoverable value of non-financial assets", issued by the IASB May 29, 2013, were approved by Regulation (EU) No 1374/2013 of 19 December 2013:
•
These amendments are to be applied retrospectively for fiscal years beginning on or after 1 January 2014.
•
Early application is permitted for entities applying IFRS 13 "Evaluation of fair value".
The objective of IFRS 13 and "Topic 820" of US GAAP is to give a truer picture of the real value of financial instruments used by listed companies:
•
Economic capital meets a primary objective of internal institutional management, while regulatory capital is to ensure a minimum solvency of institutions and of the entire banking sector.
To make profits, banks find some interest in reducing, on the one hand the losses of their own operational risk and, secondly losses of the issuer risk related to counterparty risk, hence the need to have the operational risk data associated with a counterparty risk. Reducing operational risk and counterparty risk at the same time it implies greater efficiency of banks, may, among other things, help to ensure the financial health of the institution and de facto stability of the financial system:
•
Consideration by the financial reporting of operational risk data associated with a counterparty risk provided by dashboards IT-MRI, necessarily goes in the direction of improving the legibility of the accounts, in particular when the financial and social situation of a counterparty risk deteriorates.
•
This consideration is based on the principle of triangular above communication among stakeholders required by IAS 36: "evidence is available from internal reporting system shows that the economic performance of an asset is, or will be less good as expected".
IT-IRM generates cost savings dashboards on a 3-year plan under the accounting process of "Reversal of an impairment loss for a CGU" standards prescribed by ASC 360 (Impairment and Disposal of Long-Lived Assets) / US GAAP and IAS 36 "Impairment of Assets":
a) An entity shall assess at the end of each reporting period whether there is any indication that an asset may be impaired. b)
If any such indication exists, the entity shall estimate the recoverable amount of the asset.
c) The recovery of a CGU impairment loss should be allocated to the assets of the unit, except for goodwill, pro rata to the carrying amounts of these assets. These increases in carrying amounts should be treated as reversals of impairment losses for individual assets. d)
In allocating an impairment reversal of a CGU, the carrying amount of an asset should not be increased above the lower of:
•
its recoverable amount (if determinable); and
•
the carrying amount that would have been determined (net of depreciation) if no impairment loss had been recognized for the asset in prior periods.
•
The amount of the impairment loss that would otherwise have been allocated to the asset shall be allocated pro rata to the other assets of the unit, except for goodwill
2
25 14/ Compliance of the IT-IRM with the laws of Basel III and regulations of Solvency II (EU)
•
The table below shows the IT-IRM modules articulation of the three pillars of Basel III legislation and Solvency II rules (NAIC leaves a greater margin of initiative to US insurers).
Pillars
Pillar 1
Pillar 2
Pillar 3
Basel III
Capital requirements including better management of counterparty risk Risk management and monitoring: Treatment of governance and risk management at the institutional level... Better communication on the trading portfolio, internal rating system and capital allowances allocated to different risks. All capital elements will be subject of a declaration, with a detailed reconciliation to the published accounts. Finally, banks are obliged to publish certain compensation items, including the link between performance and risk-taking of financial institutions.
Solvency II
Riskosoft IT-IRM Applications
Quantitative requirements for equity and calculation of technical provisions
M1 M2, M3
Requirements for organization and governance
et M5
Requirements regarding prudent information and regarding publication
M6 et M4
15/ Compliance of the IT-IRM with the NAIC (US Solvency):
•
An effective ERM framework should, at a minimum, incorporate the (http://www.naic.org/store/free/ORSA_manual.pdf): : NAIC (US Solvency)
•Risk Culture and Governance– Governance structure that clearly defines and articulates roles, responsibilities and accountabilities; and a risk culture that supports accountability in risk-based decision-making. •Risk Identification and Prioritization Risk identification and prioritization process that is key to the organization; responsibility for this activity is clear; the risk management function is responsible for ensuring that the process is appropriate and functioning properly at all organizational levels. •Risk Appetite, Tolerances and Limits– A formal risk appetite statement, and associated risk tolerances and limits are foundational elements of risk management for an insurer; understanding of the risk appetite statement ensures alignment with risk strategy by the board of directors. •Risk Management and Controls– Managing risk is an ongoing ERM activity, operating at many levels within the organization. •Risk Reporting and Communication– Provides key constituents with transparency into the risk-management processes and facilitate active, informal decisions on risktaking and management.
following key principles
Riskosoft IT-IRM applications
IT-IRM/M1
Risk register and ITIRM/M1
IT-IRM/M1
IT-IRM/M2, M3, M4 and M5 IT-IRM/M6 and Actuary’s tools
2
26 16 / Industrial property (Patent)
•
International Extension of the patent put down in France and in the United State:
United States Patent Application
20050154700
Kind Code
A1
Lele, Pascal
July 14, 2005
System and method of costs saving procedure automation and result optimization in looping industrial environment” (US Patent) Foreign Application Data Date
Code
Application Number
Nov 26, 2003
FR
03 14097
Systèmes d'automatisation des procédures d'économies des coûts et d'optimisation des performances dans les environnements industriels bouclés (INPI)
17/ Valuable proposal for each of our customers 17.1/ Valuable proposal for any company of significant size Each of our customers can benefit in the period from the product launch of a special offer to test 3 to 6 months as indicated on the form of partnership in appendix to connect in mode SaaS in the IT-IRM without changing anything in existing IT and have to adapt itself to the new regulations of the advantages below: a) Losses related to operational risk are overloads of management accounts and non-products (unrealized income). b) The operational risk losses have a clear impact on product cost, capital, competitiveness, income statement and counterparty risk Human resources have a dominant effect on operational risks. Therefore, operational risks affect the risks of each entity: For the insurer, operational risks have an impact on: • • • • •
counterparty risk, market risk, life underwriting risk non life underwriting risk, health underwriting, etc.
For the bank, operational risks have an impact on : • • • • •
market risk, credit risk or counterparty risk, liquidity risk, interest rate risk, country risk, etc.
For the industry and services, operational risks have an impact on: • • • • •
market risk, credit risk or counterparty risk, liquidity risk, interest rate risk, currency risk, etc.
2
27 17.2/ Specific value proposal for Banks •
Why does a banking institution need the IT-directed IRM?
17.2.1/ Addressing the weaknesses of the banking risk management information system by the accounting approach According to the Basel Committee on Banking Supervision, one of the most significant lessons learned from the 2007 global financial crisis was that the information technologies used by banks and data architectures were inadequate to support comprehensive management of financial risk. Many banks lacked the ability to aggregate risk exposures and identify concentrations quickly and accurately at the bank group level, across business lines or between legal entities. •
Some banks have been unable to properly manage the risk of low intensity due to the inadequacy of their risk data aggregation system and risk assessment practices by stochastic calculations that were not based on actual data operational risk of each institution and its counterparty credit risk (CCR).
These weaknesses have serious implications for banks and for the stability of the financial system as a whole. To help address these weaknesses the Basel Committee published in late 2014 a quality guidance document based on cost accounting of expected losses "Principles for Effective Risk Data Aggregation and Risk Reporting": •
IT-IRM is the only cost-accounting tool in the world market to supply to the stochastic calculation tools in place operational risk data processed under clause 5 (Risk treatment) of the ISO 31000 standard (see ISACA JOURNAL Volume 6, USA, Dec. 2013).
17.2.2/ Calculate banks economic capital The impact is immediately visible on; •
the capital requirements relating to entirely quantifiable, uniform and standardized credit risk, market risk, operational risk and settlement risk;
•
requirements limiting large exposures;
A / Impact on Tier 1: •
Retained earnings;
•
Other elements of accumulated comprehensive income;
•
Other reserves;
•
The fund for general banking risks.
B / Impact on Tier 2: •
Capital instruments and subordinated loan;
•
Accounts for share premium;
•
Adjustments for credit risk (capital requirement for credit risk).
C / Impact on asset risk exposure and value categories •
The exposure value of an asset is its remaining book value after applying adjustments for specific credit risk;
2
28 •
Exposed value categories which risks are monitored and limited by the data of IT-IRM applications of reporting of the banking customers: a) exposures to central governments or central banks; b) exposures to regional governments or local authorities; c) exposures to public sector entities; d) exposures to multilateral development banks; e) exposures to international organizations; f) exposures to institutions; g) corporate exposures; h) exposures to retail customers; i) exposures secured by mortgages on real property; k) exhibitions featuring a particularly high risk; l) exposures in the form of covered bonds; m) representative of securitization positions elements; n) exposures to institutions and companies subject to an assessment of short-term credit; o) exposures in the form of shares or mutual fund shares; p) exposures in the form of shares; q) other items.
17.2.3/ Benchmarks legal support for the bank to use the IT-IRM •
As of September 2014, 23 members had issued final or draft rules on their G-SIB or D-SIB framework, 26 had issued final or draft rules on the Liquidity Coverage Ratio (LCR), and 23 had issued final or draft rules on the leverage ratio. Non-Basel Committee jurisdictions also report substantial progress in the adoption of Basel III standards.
The Committee has analyzed the implications of the Basel III standards for banks. Internationally active banks continue to make progress towards meeting the fully phased-in minimum Basel III capital requirements ahead of the 2019 deadline (Basel Committee on Banking Supervision “Implementation of Basel standards: A report to G20 Leaders on implementation of the Basel III regulatory reforms, November 2014”). •
All laws of the 27 jurisdictions of the Basel Committee, G20 countries signatories of the Basel III agreement, including the United States, have legal provisions similar to those extracts of European legislation:
A/ References relating to operational risk and the requirement to take into account the operational risk data associated with a credit counterparty risk: a) Operational risk is a significant risk that the institution must be covered by equity (cf. Acts Basel III: § 52 EU legislative acts No. 575/2013 of 26 June 2013). b) The framework for managing counterparty credit risk (CCR) takes into account the required operational risks that are associated with CCR. In particular, the framework ensures that the institution manages such risks as comprehensively as practicable at the counterparty: •
aggregating CCR exposures to this counterparty with other credit exposures;
•
as well as the scale of the company (Article 286 EU legislative acts No. 575/2013 of 26 June 2013).
B / reporting obligations (Article 5, Council Implementing Regulation No 680/2014 EU) a) Institutions shall report the following information each quarter: •
Information on exposure to credit risk and the risk of counterparty credit, processed using the standard approach;
•
Information on exposure to credit risk and the risk of counterparty credit, processed using the approach based on internal ratings (NI);
•
Information on capital requirements and losses related to operational risk;
2
29 b) Institutions shall report the following information every six months: •
Information on significant losses related to operational risk.
17.3/ Specific value proposal for Insurance companies •
Why the insurer needs the IT-MRI?
A/ ORSA / FLAOR is an analytical accounting ERM process With the requirement of ORSA (own risk and solvency assessment) and FLAOR (Forward Looking Assessment of Own Risk), the insurers under NAIC (US Solvency) and Solvency II (EU) have repositioned the problem at the heart of ERM (Enterprise Risk Management): •
The operational implementation of the ORSA / FLAOR is to illustrate the ability of the insurer or group to identify, measure and manage the elements that can alter its solvency or financial position (cost accounting).
•
Under Solvency II, an insurance company must demonstrate that the level of capital to cover the risks is to a probability level of 99.5% year on year.
•
In the USA, insurance groups and the insurers of average and big size have to have made a test FLOAR at the end of 2015.
•
In Europe, guidelines for the internal model of Solvency II came into effect from the April 1 2015 to be due to all the insurers on January 1st, 2016.
st
IT-IRM provides an opportunity for all stakeholders to align their economic capital performance on "best practices" to 95.5% for operational risk cost savings: •
So the IT-IRM reduces the insurer counterparty risk to a threshold of "risk appetite" or of losses tolerance at 4,5 % in all the workposts and in all the business sectors.
B/ Prospective evaluation requirements specific risk (ORSA / FLAOR) integrated by IT-IRM of the insurer: •
Guideline 11 – Valuation and recognition of the overall solvency needs;
•
Guideline 12 – Assessment of the overall solvency needs;
•
Guideline 13 – Forward looking perspective of the overall solvency needs;
•
Guideline 14 – Regulatory capital requirements ;
•
Guideline 15 – Technical provisions ;
•
Guideline 16 – Deviations from assumptions underlying the SCR calculation;
•
Guideline 17 – Link to the strategic management process and decision-making framework;
•
Guideline 18 – Frequency.
17.4/ Specific value proposal for listed companies EU legislation on internal control aligned with the US Sarbanes-Oxley legislation imposed reporting rules and archiving for all listed companies. The most significant measure concerns the responsibility of business leaders who are now personally liable for the procedures for data collection and integrity within the framework of the financial reports of the company. To meet the new requirement to take account of operational risk data associated with a counterparty risk, these companies need IT-IRM, a flexible software system for easy archiving and management of counterparty risk efficient and highly secure manner by the client-server device of OLAP centers.
2
30 The Authority of Financial markets (AFM) verify the financial information spread by companies on the occasion of their financial transactions (offer to the public and/or applications for admission of titles on a regulated market). The Management of the broadcasting issuers of the AFM educates, in association with the Management of the accounting affairs and the Legal department, the projects of official documents of information of these companies which are approved then formally. The AFM also verifies that companies respect their obligations of periodic and permanent information. The discovery of the methodology required by Riskosoft pulled a modification of the usual technology to pass in conformance with the clause 5 of the standard ISO 31000 2009 to a system of structured decision-making based on real processed data of operational risk of the insurer and its risk counterparties.
18/ Attractive prices in the launch phase (I take this opportunity now!) •
Commercial Launch based on a special offer of test extended until the first quarterly results.
Two special offers of SaaS connection in the choice of the customer: 1. The customer reaches the advantages of the special offer by a subscription in the individual partnership (Listed companies, SMEs, municipal Administrations, etc.) by completing the SHEET "B". 2. The advantages of the special offer are more important for the customer who reaches the application on the basis of the SHEET "A". This sheet is completed for a subscription in the collective partnership by:
•
A banking institution or insurer for the benefit of its services and for the benefit of its customers;
•
A professional Association for the benefit of its services and for the benefit of its members;
•
A government for his services with budgetary autonomy or
•
A business network for its members.
The advantages of the SHEET "A" (Special offer of the collective Partnership) •
6 months of free bulletins of performance: you pay only the subscription to the base IT-IRM. Total annual cost of bulletins of performance (non-binding estimate)
Number of employees
Total monthly price of the platform
Total to pay for the 12 months
Level 1
More than 50 000
$ 615
$ 7.380
100 %
Level 2
30 000 – 50 000
$ 615
$ 7.380
100 %
Level 3
Less than 30 000
$ 615
$ 7.380
100 %
LEVELS
Annual amount without discount [$ 5.82 per employee x 6 months] (*)
Discount on six months
Total to pay (*)
(*)Thank you to complete depending on the staff by category of beneficiaries (Cf. annex)
3
31 The advantages of the SHEET "B" (Special offer of the individual Partnership) •
3 months of free bulletins of performance: you pay only the subscription to the base IT-IRM. Total annual cost of bulletins of performance (non-binding estimate)
Number of employees
Total monthly price of the platform
Total to pay for the 12 months
Level 1
More than 50 000
$ 615
$ 7.380
100 %
Level 2
30 000 – 50 000
$ 615
$ 7.380
100 %
Level 3
Less than 30 000
$ 615
$ 7.380
100 %
LEVELS
Annual amount without discount [$ 5.82 per employee x 3 months] (*)
Discount on three months
Total to pay (*)
(*)Thank you for completing the level corresponding to your staff (Cf. annex)
19/ Publications of the EU-US scientific committee which accompanies the customer The global association of audit log management, "ISACA Journal" has published in the United States for its network of 180 countries (200,000 members), two studies on IT-IRM: •
"The Value in using IT-directed Investor Relationship Management" (ISACA Journal, vol. 6) : http://www.isaca.org/Journal/archives/2013/Volume-6/Pages/JOnline-The-Value-in-Using-IT-directedInvestor-Relationship-Management.aspx
•
"Potential Impact of IT-directed Investor Relationship Management (IRM) on Employment in G20 Countries": https://drive.google.com/file/d/0B4svVlrQAP7SZGItOHB6X3Y1cjQ/
The third study, the most complete, is being validated by international supervisory committee: "A Real Time Integrated Reporting (IR) Analytical Tool to Enhance Value Creation and Ensure a common Risk Appetite within an organization" •
Private Reading through this link: https://drive.google.com/file/d/0B4svVlrQAP7Sc29WdDN5MEhLNW8
3
32
20/ The EU-US scientific ientific and technical Team Dr Pascal LELE (PhD), Director of research, development and partnerships at Riskosoft • • •
Doctor (Ph.D) from Laval University, Quebec (Canada) Doctor of René Descartes University / Institute of Psychology (Paris V) and Doctor of the Sorbonne University (Paris III)
Experience Professor of management accounting Professor of organizational psychology Consulting in socio-economic socio analysis; R & D IT Management and Business Intelligence of working time ". Expert of UNESCO & Consultant NAALC "Organization of
Selected works IT-IRM Articles •
Bezzina, F., Lele, P., Zhao, R., Grima, S., Klein, R.W. & Hellmich, M. 2013, "The Value in using ITIT directed Investor Relationship Management", Information Systems Audit and Control Association Journal, vol. 6.
•
Lele P., Zhao, R., Bezzina, F, Grima, S., . Klein, R.W. & Kattuman, P. 2014, "Potential Impact of IT-directed directed Investor Relationship Management (IRM) on Employment in G20 Countries", ISACA JOnline [2014, volume 4], vol. 4, no. ISACA JOnline [2014, volume vo 4].
Books
”After the subprime crisis, the new social partnership (2009)” Volume 1: Potential cost saving of operational risk of Banks and Insurers (385 pages) Introduced by E. FRAGNIERE - Professor in the Business school of Geneva, the International University in Geneva Volume 2: Potential cost saving of operational risk of Businesses (387 pages) Introduced by D. BERTAUX, Senior Risk Manager at ArcelorMittal group, Belgium/ Scientific Publishing Peter Lang, Bern (Switzerland) / December 2009, www.pet www.peterlang.com First book: Handbook of applied social psychology / Editions CLE, 1986
3
33
Dr Frank Bezzina (PhD), General Coordinator of the International Scientific and Technical Committee
Dr Frank Bezzina, Ph.D., is the Head of the Department of Management and deputy Dean of the Faculty of Economics, Management and Accountancy at the University of Malta. He teaches Managerial Decision Modelling, Quantitative Research Methods, Operations Research, Resear and Decision & Risk Analysis on the Faculty’s degree and MBA (Executive) program programs.
Research Interests Operational Risk Management Corporate Governance Investor Relationship Management Research methodology Statistical misconceptions Performance Management Environmental management Selected works IT-IRM Articles • •
Bezzina, F., Lele, P., Zhao, R., Grima, S., Klein, R.W. & Hellmich, M. 2013, "The Value in using IT-directed IT Investor Relationship Management", Information Systems Audit and Control Association Assoc Journal, vol. 6. Lele, P., Zhao, R., Bezzina, F.,Grima, F.,Grima, S., . Klein, R.W. & Kattuman, P. 2014, "Potential Impact of ITIT directed Investor Relationship Management (IRM) on Employment in G20 Countries", ISACA JOnline [2014, volume 4], vol. 4, no. ISACA JOnline [2014, volume 4].
Scholarly articles • • • • • • • • •
Bezzina, F., Grima, S. & Mamo, J. 2014, "Risk management practices adopted by financial firms in Malta", Managerial Finance, vol. 40, no. 6, pp. 587-612. 587 Bezzina, F.H., Baldacchino, P.J. & Azzopardi, J.R. 2014, 2014, "The Corporate Governance Relationship between the Board and Management in Maltese Listed companies" in Rethinking Corporate Governance, eds. D. Tipuric, I. Vrdoljak Raguz & N. Podrug, Pearson, Harrow, UK, pp. 1-15. 1 Cortis, D., Hales, S. & Bezzina, F. 2013, 2013, "Profiting on Inefficiencies in Betting Derivatives Markets: the Case of UEFA 2012", Journal of Gambling Business and Economics, vol. 7, no. 1, pp. 41-53. 41 Shopovski, J., Bezzina, F. & Zammit, M.M. March 2013, "The Disqualification of Company Directors and its effect on Entrepreneurship", European Scientific Journal, vol. 9, no. 7, pp. 14-31. 14 31. Bezzina, F.H. & Grima, S. 2012, "Exploring Factors affecting the proper use of derivatives: An empirical study with active users and controllers of derivatives ", Managerial Managerial Finance, vol. 38, no. 4, pp. 414-435. 414 Bezzina, F. & Sammut, D. 2012, "The Online Poker Consumer: Investigating Personality Traits, Motives, and Demographic Characteristics", International Journal of Customer Relationship Marketing and Management, vol. 3, no. 3, pp. 55-73. 55 Bezzina, F.H. & Dimech, S. 2011, "Investigating the determinants of recycling behaviour in Malta", Management of Environmental Quality: An International Journal, vol. 22, no. 4, pp. 463-485. 463 Bezzina, F. & Buhagiar, A. 2011, "STV 4+: A Proportional System for Malta's Electoral Process", Voting Matters, vol. 28, pp. 1-14. Bezzina, F.H. 2010, "Investigating gender differences in mathematics performance and in self-regulated self learning: An empirical study from Malta", Equality, Diversity Diversity and Inclusion: An International Journal, vol. 29, no. 7, pp. 669-693. 3
34
Dr Ronald Zhao (PhD), Associate professor at Leon Hess Business School, Department of Accounting, Monmouth University (USA) Areas of expertise include financial reporting, international accounting standard, financial institution disclosure, and accounting theory.
Selected Works: Books: •
Accounting for Lawyers,, coauthored with W. Wang, Beijing: China University of Political Science and Law Press (2003).
•
Venture Capital: Theory and Practice, Practice coauthored with S. Li and Z. Yu, Shanghai: Shanghai University of Finance and Economics Press (2001).
IT-IRM Articles: • •
Bezzina, F., Lele, P., Zhao, R., Grima, S., Klein, R.W. & Hellmich, M. 2013, "The Value in using IT-directed IT Investor Relationship Management", ment", Information Systems Audit and Control Association Journal, vol. 6. Lele, P., Zhao, R., Bezzina, F., Grima, S., . Klein, R.W. & Kattuman, P. 2014, "Potential Impact of ITIT directed Investor Relationship Management (IRM) on Employment in G20 Countries", Countries" ISACA JOnline [2014, volume 4], vol. 4, no. ISACA JOnline [2014, volume 4].
Scholarly articles • • • • • • • • • • • • •
"Accounting Standard for Research and Development Costs," The Hong Kong Accountant, Accountant Nov/Dec:57-62 (1995). "Environmental Performance and Reporting: Perceptions Perceptions of Managers and Accounting Professionals in Hong Kong," coauthored with B. Jaggi, International Journal of Accounting, 31:333-346 346 (1996). "Effect Effect on Cash Flows and Security Returns of an Allocation of R & D Costs between Capitalization and Expense", ", coauthored with B. Horwitz, Journal of Financial Statement Analysis,, 3:5-14 3:5 (1997). "A Bank Failure Prediction Model Based on Bank Operations Profile," coauthored with D. Clancy, AsiaPacific Journal of Accounting,, 16:255-274 16:255 (1999). "An An Emerging Market’s Reaction to Initial Modified Audit Opinion: Evidence from the Shanghai Stock Exchange," ," coauthored with C. Chen and X. Su, Contemporary Accounting Research, 17:429-455 17:429 (2000). "Relative Relative Value Relevance of R & D Reporting: Reporting: An International Comparison," Comparison Journal of International Financial Management and Accounting, Accounting 13:153-174 (2002). "Information Information Content of Earnings and Earnings Components of Commercial Banks: Impact of SFAS No. 115," coauthored with B. Jaggi, Review of Quantitative Finance and Accounting, Accounting 18:405-421 (2002). "Profitability Profitability and Productivity of Chinese Industrial Firms: Measurement and Ownership Implications," Implications coauthored with A. Zhang and Y. Zhang, China Economic Review, 13:65-88 88 (2002). "Risk Risk under ‘One Country and Two Systems’: Evidence from Classes A, B, and H Shares of Chinese Listed Companies," ," coauthored with Y. Zhang, Review of Pacific Basin Financial Markets and Policies, Policies 6:179-197 (2003). "A Study of the R & D Efficiency and Productivity of Chinese Firms," Firms," coauthored with A. Zhang and Y. Zhang, Journal of Comparative Economics, Economics 31:444-464 (2003). "Corporate Governance and Firm Performance: Some Evidence from Chinese Listed Companies," AsiaPacific Journal of Accounting and Economics, Economics 10:187-201 (2003). "The The Valuation Differential between Class A and B Shares: Country Risk in the Chinese Stock Market," Market coauthored with Y. Zhang, Journal of International Financial Management and Accounting, Accounting 15:44-59 (2004). "The The Impact of SFAS No. 114 on the Linear Information Dynamic for Commercial Banks," Banks coauthored with Y. He, Review of Quantitative Finance and Accounting, Accounting 23:313-328 (2004).
3
35
Dr Simon Grima (PhD) •
Lecturer in the Department tment of Banking and Finance,
•
Head of the Insurance Department ment at the University of Malta and
•
President off the Malta Association of Risk Management (MARM).
Research Interests •
Governance Risk Management and Compliance
•
Financial Derivatives
•
Financial Management
•
Internal Audit
•
Risk Management
•
Banking
•
IT Risk Management
Selected works
IT-IRM Articles •
Bezzina, F., Lele, P., Zhao, R., Grima, S., Klein, R.W. & Hellmich, M. 2013, "The Value in using IT-directed IT Investor Relationship Management", Information Systems Audit and Control Association Journal, vol. 6.
•
Lele, P., Zhao, R., Bezzina, Grima, S., . Klein, R.W. & Kattuman, P. 2014, "Potential Impact of IT-directed IT Investor Relationship Management (IRM) on on Employment in G20 Countries", ISACA JOnline [2014, volume 4], vol. 4, no. ISACA JOnline [2014, volume 4].
Scholarly articles • • •
• • • •
Bezzina F., Grima S., Mamo J. 2014, "Risk Management practices adopted by financial firms in Malta", Managerial Finance, (Emerald d Group Publishing Ltd.), vol. 40, no. 6. Bezzina, F., Grima, S. & Falzon, J. 2013, "Accounting for the level of success of firms in achieving their objectives for using derivatives", Palgrave Macmillan Studies in Banking and Finance Institutions (Series Editor: ditor: P. Molyneux), ed. J. Falzon, Palgrave Macmillan, Basingstoke, , pp. 183183-202. Bezzina, F., Grima, S. & Falzon, J. 2013, "Accounting for the level of success of firms in achieving their objectives for using derivatives", Bank Stability, Sovereign Debt and Derivatives: Palgrave Macmillan Studies in Banking and Finance Institutions (Series Editor: P. Molyneux), ed. J. Falzon, Palgrave Macmillan, Basingstoke, UK, , pp. 183-202. 183 Bezzina, F., Lele, P., Zhao, R., Grima, S., Klein, R.W. & Hellmich, M. 2013, "The "The Value in using IT-directed IT Investor Relationship Management", Information Systems Audit and Control Association Journal, vol. 6. Bezzina, F. & Grima, S. 2012, "Exploring factors affecting the proper use of derivatives: An empirical study with active users ers and controllers of derivatives", Emerald Group Publishing Ltd - Managerial Finance, vol. 38, no. 4, pp. 414 - 435. Consiglio, J.A. & Grima, S. (ed) 2012, A Law Based Financial Services Architecture, Pearson ISBN 9781781343166 edn. Grima, S. 2012, "The Current Financial Crisis and Derivative Misuse", Online Journal of Social Sciences Research ISSN 2277-0844, 0844, vol. 1, no. 8, pp. 265-276. 265 3
36
Prof. Dr Martin Hellmich (PhD), Professor of financial risk management at the Frankfurt School of Finance & Management (Frankfurt, Germany) Until August 2012 Martin Hellmich worked as Head of Fixed Income for the Main First Bank in Frankfurt am Main. Previously, he served as Vice President at Deka Bank for the loan portfolio in the banking book and served as Managing Director of the ABS Group at Cantor Fitzgerald Europe in London. He was also Structured Struct Credit Sales Director, where his work was focused at Barclays Capital on bespoke transactions for institutional clients in Europe. Previously, he worked as Head of Strategic Asset Allocation in the field of capital market investments LBBW and as a portfolio tfolio manager for the Cominvest and the Alliance. Martin Hellmich is PhD in mathematics and for more than twelve years at the Frankfurt School as a lecturer in Quantitative Methods, risk management and regulatory issues worked. Mr. Hellmich has published in several scientific journals such as the Journal of Quantitative Finance articles on the topics of credit risk modeling and portfolio optimization.
Selected works IT-IRM Articles •
Bezzina, F., Lele, P., Zhao, R., Grima, S., Klein, R.W. & Hellmich, M. 2013, 2013, "The Value in using IT-directed IT Investor Relationship Management", Information Systems Audit and Control Association Journal, vol. 6.
Scholarly journal articles
• •
Hellmich, M., Kassberger, S., Schmidt, W., 2013. Credit modeling under jump diffusions with exponentially distributed jumps: stable calibration, dynamics and GAP risk, International Journal of Theoretical and Applied Finance Vol. 16(4), pp. 1-26. 1 Hellmich, M., Kassberger, S., 2011. Efficient and robust portfolio optimization in the multivariate Generalized eneralized Hyperbolic framework, Quantitative Finance Vol. 11(10), pp. 1503--1516.
Contributions to edited volumes
•
Hellmich, M., Kassberger, S., 2008, Constant Proportion Debt Obligations: an introduction, in: Gunter Meissner (ed): The Definitive Guide to CDOs, London: Risk Books, pp. 363-388. 388.
•
Hellmich, M., Steinkamp, O., 2004, Pricing and Hedging of Structured Credit Derivatives, in: Matthias Gundlach, Frank Lehrbass (eds): CreditRisk+ in the Banking Industry,, Berlin: Springer, pp. 325-362. 325
•
Hellmich, M., Siddiqui, iddiqui, S., 2014. Finanzmarktregulierung: klassische Geschäftsmodelle im Wandel, Die Bank (1) pp. 40-44;
•
Hellmich, M., Siddiqui, S., 2014. Perspektiven der Mittelstandsfinanzierung,Unternehmeredition Mittelstandsfinanzierung,Unternehmeredition (2) pp. 1819.
•
Brüggentisch, C., Hellmich, M., Gilgenberg, Gilgenbe B., 2005. Freie Fahrt für Asset-Backed Backed-Securities und Credit Linked Notes, Versicherungswirtschaft Jg. 60(17), pp. 1296-1299.
Expert Opinion / Policy Paper
•
Hellmich, M., Pinedo, M., Schuck, B., Uhl, A., Siddiqui, S., 2014. Banking Study: The Benefits of o Innovative Information Technology in the Banking Industry in Turbulent Times, Times, commissioned by Business Transformation Academy (BTA).
3
37
Dr Robert W. Klein (PhD), Associate professor and director of the Center for Risk Management and Insurance Insurance Research in the J. Mack Robinson College of Business at Georgia State University (USA). Before starting his career at Georgia State in 1996, Klein served as the director of research for the National Association of Insurance Commissioners He also served ved as a staff economist for the Michigan Insurance Bureau and the Michigan Senate Fiscal Agency. Klein has written extensively on various topics on insurance and insurance regulation, including the structure and performance of insurance markets, competitive competitive rating, catastrophe insurance problems, urban insurance issues, workers’ compensation, international insurance regulation and solvency regulation.
Selected Publications Bezzina, F., Lele, P., Zhao, R., Grima, S., Klein, R.W. & Hellmich, M. 2013, "The Value Val in using IT-directed directed Investor Relationship Management", Information Systems Audit and Control Association Journal, vol. 6. •
Lele, P., Zhao, R., Bezzina, F., Grima, S., . Klein, R.W. & Kattuman, P. 2014, "Potential Impact of IT-directed directed Investor Relationship Relationship Management (IRM) on Employment in G20 Countries", ISACA JOnline [2014, volume 4], vol. 4, no. ISACA JOnline [2014, volume 4].
•
Gabel, Joan T. A., Nancy R. Mansfield, and Robert W. Klein, “The New Relationship Between Injured Worker and Employer: An Opportunity Opportunity for Restructuring the System.” American Business Law Journal 35, no. 3 (Spring 1998): 403-442. 403 442.
•
Grace, Martin F., Scott Harrington, and Robert W. Klein, “Risk“Risk-Based Capital and Solvency Screening in Property-Liability Property Insurance: Hypothesis and Empirical pirical Tests.” Journal of Risk and Insurance 65 (June 1998): 213-243. 213
3
38
Dr Paul Kattuman (PhD), University of Cambridge (UK) Reader in Economics Director of Studies in Management and Fellow of Corpus Christi College BA, MA (Calicut University), ersity), MPhil, PhD (University of Cambridge) Research interests Applied econometrics and statistics; industrial organisation; corporate performance; system dynamics; India; China. Subject group : Economics & Policy Professional experience Dr Kattuman is on the editorial board of the B.E. Journal of Economic Analysis & Policy. Policy Prior to beginning his academic cademic career, he was an economist in the Indian civil service. Previous appointments Dr Kattuman has been a Senior Research Fellow at the University of Cambridge Department of Applied Economics, and a lecturer in economics at Durham. He has held Visiting Professorships at Université Paris 12 and Paris-Est Est Créteil and was appointed Grupo Santander Visiting Professor at Universidad Complutense de Madrid. He was visiting Faculty Scholar at the Kennedy School of Government, and at the Department of Statistics, St both at Harvard University. He is a member of the Cambridge Corporate Governance Network (CCGN). (CCGN)
Selected works IT-IRM Articles •
F.,Grima, S., . Klein, R.W. & Kattuman, P. 2014, "Potential Impact of ITIT Lele, P., Zhao, R., Bezzina, F.,Grima, directed Investor Relationship ationship Management (IRM) on Employment in G20 Countries", ISACA JOnline [2014, volume 4], vol. 4, no. ISACA JOnline [2014, volume 4].
Scholarly articles •
Herzog, J.O., Munir, K.A. and Kattuman, P. (2013) "The King and I: monarchies and the performance of business groups." Cambridge Journal of Economics, Economics 37(1): 171-185 185 (DOI: 10.1093/cje/bes032)
•
Ibragimov, M., Ibragimov, R. and Kattuman P. (2013) "Emerging markets and heavy tails." Journal of Banking and Finance,, 37(7): 2546-2559 2546 2559 (DOI: 10.1016/j.jbankfin.2013.02.019)
•
Jiang, N. and Kattuman, tuman, P.A. (2012) "China's WTO accession and long-term term profitability of Chinese firms." International Journal of the Economics of Business, Business 19(1): 53-73 73 (DOI: 10.1080/13571516.2012.642638) 42638)
•
Bhattacharjee, A., Higson, C., Holly, S., and Kattuman, P. (2009) "Macroeconomic instability and business exit: determinants of failures and acquisitions of UK firms."Economica, firms." , 76(301): 108-131 108
•
Baye, M.R., Gatti, J.R.J., Kattuman, P. and Morgan, J. (2009) "Clicks, discontinuities, and firm demand online." Journal of Economics and Management Strategy, Strategy 18(4): 935-975
•
Baye, M.R., Gatti, J.R.J., Kattuman, P. and Morgan, J. (2007) "A dashboard for online pricing." California Management Review,, 50(1): 202-216. 202 3
39
Philippe LELE (MD), CIO Riskosoft Corporation •
Philippe LELE is the engineer who on the model developed by his father, Dr Pascal LELE, built, articulated and automated databases of interactions of internal control of operational risk data in real-time. real time. He also built the Intranet system syst interactions of cost accounting of call centers OLAP of critical size operating in client-server client networks.
•
This semi-automated automated system for processing operational risk data stored in data warehousing of companies around the world creates more jobs than the t computer had never created so far.
His great achievements (Cf. ISACA Journal, USA, August 2014) Development of the Intranet of call center OLAP semi-automated semi automated and fully secure.
1/Economic Database (Economic Metrics database)
•
Axis of Decision Making of Level 1/Finance function
2/Social Database (Social Metrics database) •
•
-
Axis of Decision Making of level 2-1/HRM 2 function Measure of employee satisfaction Axis off Decision Making of Level 2-2/ 2 HRM function Measure of Psychosocial Risks
3/Dashboards of cost accounting of indicators factors or causes of operational risk
•
Axes Decision Making Level 3/Operations Management function
RISKOSOFT CORPORATION SAS SIRET 529 168 858 00023 APE 5829C (Edition des logiciels l applicatifs) TVA Intracommunautaire FR27529168858 27 Bd de l’Ariane 06300 NICE (France) Tel. 33628808324 www.riskosoftcorp.com /
[email protected] 3
40
Sheets of subscription of the special offer of prolonged test
Sheet A Demand of subscription for a collective partnership to be completed by:
•
Professional Association for the benefit of its members,
•
A banking institution or insurer for benefits to customers
•
A business network
•
A government for its services that have budgetary autonomy.
CONTACT INFORMATION ORGANISM :
CONTACT PERSON :
TITLE :
ADRESS :
TEL :
CITY :
COUNTRY:
TEL :
EMAIL :
FAX :
4
41 PARTNERSHIP PROGRAM COVERS ALL IT-IRM MODULES BELOW
Total price of the platform: $ 615/ Month or 7.380/ Year (Excluding bulletin of individual performance)
This price includes the modules of internal control functions: 1. Finance function: M1 - Performance Plan tables and internal reporting panel (prudential reporting -Feedback / M6) 2. Human Resource Management function: M2 - Employee Satisfaction and M5 - Psychosocial Risks 3. Operations Management function: M3 - Cost savings (indicators: absenteeism, quality defects, accidents at work, direct productivity, know-how)
For any recommendation of Riskosoft IT IRM to your members, customers we offer you and your members and clients, employees' performance bulletins for 6 months (which costs $5, 82/month per employee).
ACCESS LEVEL IN COLLECTIVE PARTNERSHIP PROGRAM - Estimation of the benefit provided to members ($ HT)
Total annual cost of bulletins of performance (non-binding estimate)
Number of employees
Total monthly price of the platform
Total to pay for the 12 months
Level 1
More than 50 000
$ 615
$ 7.380
100 %
Level 2
30 000 – 50 000
$ 615
$ 7.380
100 %
Level 3
Less than 30 000
$ 615
$ 7.380
100 %
LEVELS
Annual amount without discount [$ 5.82 per employee x 6 months] (*)
Discount on six months
Total to pay (*)
(*)Thank you to complete depending on the staff by category of beneficiaries
4
42
TERMS AND CONDITIONS OF PARTNERSHIP
All Riskosoft IT-IRM partnership applications are subject to the Terms and Conditions for a period of 12 months from the date of signature of the terms and conditions. The contract is renewable by tacit renewal, except denunciation by one of the parties 3 months before the term. a) Test period (30 days free and without obligation): we suggest the organization to do the tests by all its members or customers interested. A partnership code that you can send to your members or customers will be assigned. Each member or client through this code may request the allocation of its confidential codes allowing access to software Riskosoft IT-IRM. b) Each member will receive 30-day free trial at its first connection to the server.
c) The contract is transmitted to the legal representative 15 days after the start of the test period. After this testing period, the ENTITY can validate the contract: he signs and returns a double by email to Riskosoft. He can also give up or suggest modifications to Riskosoft.
Name and title of the authorized representative: Date :
Signature of the legal or authorized representative
Signature du représentant légal ou autorisé
4
43
Sheet B Individual partnership application:
CONTACT INFORMATION
ORGANISM :
CONTACT PERSON :
TITLE :
ADRESS :
TEL :
CITY :
COUNTRY:
TEL :
EMAIL :
FAX :
4
44
PARTNERSHIP PROGRAM COVERS ALL IT-IRM MODULES BELOW
Total price of the platform: $ 615/ Month or 7.380/ Year (Excluding bulletin of individual performance)
This price includes the modules of internal control functions:
1. Finance function: M1 - Performance Plan tables and internal reporting panel (prudential reporting -Feedback / M6) 2. Human Resource Management function: M2 - Employee Satisfaction and M5 - Psychosocial Risks 3. Operations Management function: M3 - Cost savings (indicators: absenteeism, quality defects, accidents at work, direct productivity, know-how)
ACCESS LEVEL IN INDIVIDUAL PARTNERSHIP PROGRAM (Price € HT)
Total annual cost of bulletins of performance (non-binding estimate)
Number of employees
Total monthly price of the platform
Total to pay for the 12 months
Level 1
More than 50 000
$ 615
$ 7.380
100 %
Level 2
30 000 – 50 000
$ 615
$ 7.380
100 %
Level 3
Less than 30 000
$ 615
$ 7.380
100 %
LEVELS
Annual amount without discount [$ 5.82 per employee x 3 months] (*)
Discount on three months
Total to pay (*)
(*)Thank you for completing the level corresponding to your staff
4
45
TERMS AND CONDITIONS OF PARTNERSHIP
All Riskosoft IT-IRM partnership applications are subject to the Terms and Conditions for a period of 12 months from the date of signature of the terms and conditions. The contract is renewable by tacit renewal, except denunciation by one of the parties 3 months before the term. a) Test period (30 days free and without obligation): we suggest the organization to do the tests by all its members or customers interested. A partnership code that you can send to your members or customers will be assigned. Each member or client through this code may request the allocation of its confidential codes allowing access to software Riskosoft IT-IRM. b) Each member will receive 30-day free trial at its first connection to the server.
c) The contract is transmitted to the legal representative 15 days after the start of the test period. After this testing period, the ENTITY can validate the contract: he signs and returns a double by email to Riskosoft. He can also give up or suggest modifications to Riskosoft.
Name and title of the authorized representative: Date :
Signature of the legal or authorized representative
4
