Financial Risk Management
- A spate of high-profile business failures and the emergence of tougher regulations have put organizations under pressure to manage financial risk more effectively. Client organizations have to be aware of the need to manage credit, market, liquidity and operational risks, as well as maintain sufficient levels of economic capital to support the risk facing them.
Risk management is highly complex, with risks often interrelated, and requiring sophisticated tools and techniques. Sarbanes Oxley, Basel II, Solvency II and the cost of capital will require expense and resources, it will ultimately help management to view risk as a major part of corporate strategy.
Why KPMG?- An integrated approach
KPMG has an outstanding team of risk management professionals who can help design and implement a framework to manage or reduce risk.
We help clients create an overall framework that satisfies compliance demands, and allows them to identify, monitor, measure and report risk and ultimately make better strategic decisions.
We offer the following services:
- Operational risk services
By assessing operational risks such as IT and people, we can help highlight areas of concern and improve processes and governance.
Credit risk services
Financial services companies in particular can benefit from an in-depth look at credit risk framework and measurement tools, and review of relative credit quality across different parts of the organization.
Market risk management
Recent stock market fluctuations have reinforced the need to look at how market risks are managed, and KPMG has a number of tools to help financial services companies and those in the energy and utilities field, as well as commercial clients. We can put together a market risk management framework, evaluate pricing models, assess portfolios or transactions and carry out stress testing.
Treasury risk services
KPMG can help clients better prepare for interest rate and currency fluctuations, hedging and financial accounting for derivatives,(under IAS 39 and FAS 133). We offer asset and liability services, trading controls management, risk pricing, transfer pricing, hedge management and capital allocation management.
Liquidity services
Holding too much cash can be costly and can hold back growth; equally holding too little can threaten an organization’s very survival. Liquidity management processes will help keep clients at appropriate levels.
Commodity and Energy risk services
Both energy companies and industries that rely on certain commodities need to be prepared for changes in price and supply, and KPMG can help with modelling, valuation and pricing, as well as sustainability and compliance issues.
Economic Capital
The main benefits of using an Economic Capital framework are:
- It gives a safe level of capital to protect against disasters and meet regulatory requirements
- It helps management optimize capital allocations
- It measures risk against returns to safeguard shareholder profitability
- It links risk with capital, to give greater economic security for debt holders
- It supports strategic decision making.
- BASEL II
- Basel II, the new capital regulation, is designed to help financial service companies to improve risk and asset management and avoid financial disaster. All banking institutions must have sufficient capital to counter any risks they face, by having eligible capital to risk aggregate ratio of 8 percent.
To comply with Basel II, financial institutions will need to fully understand all possible risks as well as their potential impact and correlations. Management will have to prepare itself for the accord by looking at the data capture, creditor analysis and risk management.
Before implementation, clients need to know the wider effect of the regulation upon the business:
- How is risk data used in decision making?
- How is regulatory capital calculated?
- Should we exit certain markets?
- How will analysts, customers and shareholders view us?
- Why KPMG? – Building Basel ll into a client’s business
KPMG’s team has experience in risk, regulatory, Financial Risk Management and actual delivery of new systems and processes.
We help clients develop a clear business case that meets regulatory demands and results in improved performance. Factors to consider include:
- Product portfolio
- Customer profile
- Existing management practices
- Quality and availability of data
- Current lT infrastructure.
- A practical approach
KPMG takes an in-depth look at the unique position of each client to understand how risk management tools and technology can be combined and managed to meet both internal and regulatory objectives. This presents a number of key challenges:
- What kind of post Basel ll model clients want, and how to gain consistency across the group
- Data management
- Scope of the regulatory review
- How internal capital is measured
- A sound methodology
By tailoring a proven methodology to each client’s situation, KPMG can help get the maximum value out of Basel ll:
- Governance and Risk Management frameworks
We look at client communication processes to help ensure the right information flows to the right places, and that any framework fits into the board’s risk approach.
- Credit Risk Management
It’s essential to have a sound credit risk policy, with loss frameworks and portfolio management, including economic capital and risk adjusted return on capital.
- Operational Risk Management
KPMG assesses a clients’ policies on people and systems, and help them create a structure that produces effective management information.
- Regulatory Review and Capital Planning
We use our experience in this area to help ensure clients engage the relevant national regulators early in the program. We also look at capital structuring and planning, approval of models and capital, and prudential rules and guidance.
- Information Risk Management
This includes identifying gaps in data, assessing data quality, and creating the right systems for credit and operational risk modeling. We also assist with project management, testing and implementation.
- For further information on KPMG's Advisory Services, please contact us.
Key Contact
İdil Gürdil
Partner
Head of Risk Management & Compliance
Tel: +90 212 317 74 00
e-mail Link
İdil Gürdil
Partner
Head of Risk Management & Compliance
Tel: +90 212 317 74 00
e-mail Link
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