Large Italian Bank: Integrated Risk Management and Forecasting for Basel II

Accenture helped this large Italian bank develop an improved, integrated framework for risk management to achieve Basel II compliance and, more importantly, operate more effectively.

One of the largest banks in Italy, this client has assets in excess of $120 billion. It serves a broad range of clients, primarily in retail banking, leasing and private banking.

As part of its overall program to comply with Basel II regulations, the bank needed to develop a methodology and operational framework for integrated risk management and forecasting. Its main challenges were a siloed approach to risk and a lack of risk methodologies and metrics.

The bank needed support to manage this complex project within tight deadlines, and access to specific experience and skills across the full range of risk integration activities (including IT and process and implementation issues). These were all skills possessed by Accenture, with whom the bank had been working closely since 2004, when its Basel II program was initiated.

The Accenture Risk Management team worked closely with the bank in providing a range of services, including project management, solution design, prototype development and first-time application support. Accenture helped the bank create an integrated framework to measure and assess capital requirements and economic capital in order to develop a new global risk system tool to integrate and forecast economic capital measures.

A second workstream was to integrate the strategic planning and risk forecasting processes through the definition and application of simplified models to estimate capital requirements and economic capital.

Thirdly, Accenture integrated the bank’s stress-testing procedures into the new conceptual framework. The client then implemented the new risk management and forecasting system.

With Accenture’s help, the bank now performs more accurate simulations of its capital position and risks, thus meeting the requirements of regulators and the business itself. It can now monitor its total exposure to all relevant risks, verify its capital adequacy in line with new requirements and support an integrated, comprehensive risk-planning process. Accenture also provided key performance indicators.

As a result of its upgraded risk management processes, the bank can now reduce its interest payments, while helping to create a more solid financial foundation to help weather future financial storms. This collaborative effort to improve the bank’s risk management capabilities will help in its drive to achieve and maintain high performance.