IFRS 9 – More than a Risk Model

IFRS 9 – More than a Risk Model

Defining any integration’s impact as the effects of taking data from one system and moving it to another, either manually or automatically, is misleading in its simplicity. Understanding the profound impact of IFRS 9 on your business and your organization is not about having a credit risk model for loans, calculating the probability of default or estimated credit loss, etc. It’s about how it intrudes upon policies, accountabilities, finances, data, security, communications and your future. It’s about how it will impact today and tomorrow. This regulation is bigger than a calculation, if you view it comprehensively, it is capable of profoundly changing your business and organization.

Impact

IFRS 9 is not simplistic, it’s a penetrating regulation! Its intrusion can be slowed; however, it will eventually be profound and pervasive. The hope for any regulation, is for minimal impact in effort and time, for good reason; you’ve got a business to run. Here’s the reality, this regulation will change how you do business. There is no minimal approach to IFRS 9, its pervasiveness is inevitable, its integration will be comprehensive, the impact profound. For example; the credit risk model, even as a standalone, will cause your organization to change and those that do will benefit the most:

Each financial institution needs to define its own risk model, to do so:

• Must consider their historic and current loans
• Must consider their business and lending policies
• Must take into consideration their loan products
• Must take into consideration data required for the risk model
  • Historic data
  • New data
  • Total management of data
• Must consider stakeholders’ accountability
  • Senior Management
    • Risk Management, Audit, Lending, Finance, Compliance
    • Board of Directors
• Must consider the dissemination of information to the stakeholders
• Must consider the financial impact the model will have on the financial institution
  • Profit & Loss
  • Balance Sheet
    • Capital Requirement
• Must consider how and when to re-evaluate the credit risk model

Understanding the complexities in managing the IFRS 9 intrusion on existing and new processes, brings the scope of its impact into focus. The control and management of these processes will exert more pressure on your business and organization than ever before. That pressure will be, a transformation moment, when it first seems oppressive and then, through the natural talents of leadership, you recognize the evolutionary period you are entering.

Recognizing that technology is the lens that brings focus to the solution, the answer becomes imminent. This is not a problem, not oppression, it’s an opportunity. It’s an opportunity so evolutionary to the organization, that the right technology will create a bridge to the future. RiskCALM4 will continue to translate your company to an evolutionary period of leadership, it is the right technology.

Comprehensive Integration

• Building a unique credit risk model for each financial institution
  • Incorporates data automatically from loan servicing system
• System controlled and managed policies
• System managed loan products
• Automated data management
• Automated accountability through automated dissemination of information to the stakeholders
• Automatic alerts to stakeholders
• Information to inform the Board of Directors as well as investors
  • Provisioning impact on P&L
  • Capital requirements
  • Auditability
• Automated management of financial impact to the financial institution
• On demand re-evaluation of the credit risk model

The infusion of IFRS 9 processes into your business, creating intersecting requirements throughout your areas of Risk Management, Compliance, Lending, Finance and Audit, while putting more accountability on the Board of Directors will be system managed. Your policies and credit risk model are collaborative functions, conflating policy with dynamic information. Without the dynamic integration and alignment of their requirements, the “looking forward” mindset of IFRS 9, will always be looking backwards.

Future

Without automation and the ability to make dynamic and informed decisions, especially necessary in a lending environment, growth will become impossible. More importantly, in this world of instant gratification, a world serving the tech savvy millennials and Gen Z customers, without actionable technology a financial institution’s market space will shrink. The timeframe for a loan decision should be shorter not longer.

In the future, financial institutions will need to recognize all their assets and develop unique ways of monetizing them. Utilizing our innovative technology, creating new social networks that can be monetized, allowing financial institutions to grow their business organically, service it better and reduce cost. As you prepare for an IFRS 9 solution, consider the importance of making decisions now, that will utilize all the IFRS 9 integration to propel your organization to the future.

Conclusion

In conclusion, our IFRS 9 solution, RiskCALM4, will resolve your IFRS 9 credit risk requirements and promote opportunities for the future growth of your organization. The possibilities are numerous; the ability is there, the option is yours, by utilizing RiskCALM4 the solution could pay for itself.