Risk Mapping

The client is a French retail bank and a subsidiary of the largest French insurance group combining the advantages of an online bank and a network of physical agencies. It offers a whole range of banking services including: current account and loans as well as multiple insurance, complementary health and provident contracts.

THE CHALLENGE

Following the Group Audit recommendations, the client had decided to set up an action plan to build a comprehensive and common risk mapping to improve bank risk profile assessment as well the interaction with other strategic processes, i.e ICAAP, ILAAP, Risk Appetite Framework, etc. The risk mapping covers several key components:

• Identification of all risks inherent to bank activities and the risk drivers related
• Identification of risk mitigants
• Gross and net risk materiality assessment
• Formalisation of an appropriate control plan for the 2nd line of defence of the financial risk function

APPROACH AND SOLUTION

The approach retained by Avantage Reply consisted of identifying all the relevant divisions and conducting several workshops to help stakeholders to identify risks inherent to their activities in order to assess their materiality and define an appropriate control plan for key financial risks. To reach the objectives, an experienced team was deployed, including an Associate Partner, a Manager and a Senior Consultant to provide subject matter expert and project management on the building blocks described below:

Risk identification:
• Combined approach (top down and a bottom up approaches) in order to cover all entities and activities.
• Methodology support to analyse the business model and identify all relevant risks.

Risk driver identification:
• Discuss with the stakeholders the business’ vulnerabilities and identify the associated risk drivers.
• Identify a preliminary harmonised taxonomy.

Materiality assessment:
• Set up materiality grid (quantitative and qualitative grids) in order to assess all the relevant identified risks.
• Run a first gross risk assessment.

Mitigants identification:
• Identification of all the mitigants.
• Improve the assessment of the Bank’s risk profile.
• Run a second net-risk assessment.

Risk profile identification and documentation using the results of previous steps

RESULTS AND BENEFITS

The risk mapping has been set and the methodology implemented to allow the client to improve internal risk assessment and have a better integration with other risk management processes. The conducted works also allowed the client to better anticipate the preparation of all the other strategic process and ensure consistency.