Financial risk management / Risk management strategy
Having an integrated strategy to focus on all areas of risk management can improve shareholder value. The importance of risk
management has been highlighted by the introduction of King II on Corporate Governance. Our expert team can assist you with
the assessment, design and development of a financial risk management strategy and the implementation thereof through the
establishment of appropriate policies and procedures.
Basel II
The new Basel Accord presents the financial services industry as a whole with significant challenges. PwC provides specialist staff, a
structured approach, and dedicated tools, to help institutions address these challenges. Our services include a diagnostic review, to
identify the gaps that need to be addressed. We also provide our clients with assistance during the implementation phase, covering
inter alia risk management strategy and processes, risk measurement, systems and data infrastructure.
Credit risk
Banks designing and implementing internal rating systems benefit from improved risk monitoring and potential capital savings.
Portfolio modeling techniques ensures risk management on a portfolio level, and positively impact credit capital. Our credit
specialists can assist you with the design and implementation of a rating/scoring system that is both Basel compliant and
benchmarked against best practice, as well as portfolio modeling methodologies. Our expertise also spans across the credit risk
framework, including credit framework, policies, procedures and technology.
Market risk
Moving to an internal model for market risk may present a significant capital saving for many banks. We can assist you with the
validation process needed for the SARB approval, as well as correspondence with the SARB. We can also assist you to improve
your market risk management environment, looking at not only the regulatory requirements, but also implementation or refinement of
policies, procedures, back testing, stress testing, reporting and system architecture, design and implementation.
Operational risk
Management of operational risk through analysis of risk events and quantification of this risk type has enabled the financial industry
to design risk mitigation controls and assess operational risk for strategic decision-making. We can assist you with the design of
processes to mitigate operational risk, the selection and implementation of loss event databases and the quantification of operational
risk. We can also assist you with the review of your application for AMA approval at SARB.
Economic capital
Economic capital models enable companies to compare business units on an equal footing and ensure more accurate strategic
decisions. These models therefore quantify the risks the company face in order to calculate the capital needed to cover these
risk and to determine the real returns made. We have in-depth knowledge of capital allocation and risk adjusted performance
measurement methodologies and can assist clients to design or improve on these models.
Accounting for financial instruments and share based payments
The accounting standard IAS 39 confronts companies with various accounting and valuation challenges. We can assist clients with
compliance to the requirements of IAS 39, which includes assistance in developing IAS39 compliant hedging and accounting policies,
valuation of instruments as well as the presentation of training courses. Our experience includes various financial instruments ranging
from vanilla type derivatives to complex structured products and hedges.
Valuations of complex instruments
Our professionals can assist with the valuation of complex financial instruments and portfolios for independent review. We also assist
with the valuations of share option schemes and other share-based payment transactions in terms of IFRS2. In addition, we evaluate
and review valuation models used.
Treasury services and systems
Whether operating as an in-house bank or a cost centre, corporate treasury is exposed to many of the same risks as a financial
institution. We have extensive experience in assisting organisations position the treasury function to identify and manage those risks
in a way that effectively supports the business. Our services include design, implementation and review of, policies and procedures,
limits, and the cash management process. In addition, we have treasury system skills for the selection, implementation and
adaptation of technology.
Risk systems and software
The automation of risk management processes has improved substantially over recent years. Systems and software can be applied
across the risk spectrum in treasury, market and credit risk areas, spanning limit and exposure management, portfolio tools and asset
liability management systems. Our professionals have the skills to select as well as implement these tools based on best practice
specifications.
