CARMA
CORPORATE ACTIONS RISK MEASUREMENT APPLICATION
Corporate Actions and Income processing has long been recognised as the riskiest part of the post trade process. Many, if not all firms within the industry have suffered significant financial losses relating to this operational process.
Historically, there has never been a commercially available system or framework within which the monetary value of the operational risk associated with this process can be measured. To address this Ibacas has used its extensive Asset Services specialist knowledge and worked with leading financial institutions to develop the Corporate Actions Risk Measurement Application – Carma.
Carma allows firms to run real-time analytics of their Corporate Actions processing portfolio and produce detailed analysis of the monetary value of the associated risk exposure, from an enterprise level down to an individual account position.
Where is the risk associated with Corporate Actions processing?
In addition to the Operational Risk that can result in financial loss, Carma also takes into account the risks associated with Optimisation of Trading Strategy, Client/Counterparty Risk and Regulatory Risk.
IBACAS HAS USED ITS EXTENSIVE ASSET SERVICES SPECIALIST KNOWLEDGE AND WORKED WITH LEADING FINANCIAL INSTITUTIONS TO DEVELOP CARMA
MEASURING CORPORATE ACTIONS RISK
Ibacas has worked closely with the market to develop CARMA and the underlying risk calculation algorithms, from review of the initial concept, through design and development of the model, to final refinement and system demonstration. This approach, combined with Ibacas’s directors’ 70+ years of Asset Services experience, means that Carma has been designed to meet the needs of real world operations groups across the industry.
Within Carma, the risk associated with processing a Corporate Action event is defined as: The value of an event, multiplied by the likelihood that an error will occur and the impact of that error
OPERATIONAL RISK:
VALUE OF EVENT
x
LIKELIHOOD OF ERROR
x
IMPACT OF ERROR
CARMA HAS BEEN DESIGNED TO MEET THE NEEDS OF REAL WORLD OPERATIONS GROUPS ACROSS THE INDUSTRY
CARMA PROCESS & TECHNOLOGY
Carma takes in data that should already be present within your organisation, thereby minimising the integration effort required: Announcement Data, Security Data, Position Data and FX Rates for base currency conversion. The data is then run through a three-stage risk calculation process.
CARMA
OUTPUT
EVENT EVALUATION
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Ten core valuation calculations based on ISO standards
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Enterprise-wide
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Entity Level
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Event Level
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Client Level
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Production plus Scenarios
EXTERNAL ADJUSTMENT FACTOR
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Event type
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Country of issue
INTERNAL ADJUSTMENT FACTOR
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Process optimisation
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Resource profiling
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Position size
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Position types
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Account types
BENEFITS - RISK MEASUREMENT
TECHNOLOGY
Output can be viewed through the highly configurable user interface, export via Excel or other formats if required. Carma has an open database at its core which allows wholesale interrogation of the output data outside the platform.
Carma is designed to run as a horizontally scalable stateless cluster which can be sized to meet the high data volumes in corporate actions processing. The server supports integration with other systems with lightweight REST APIs and service bus integration to provide notifications back to connected clients and processes. The front end application uses modern Javascript frameworks to give a rich user experience across all modern web browsers and many older versions.
BENEFITS
REGULATORY REPORTING
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Anticipate the increasing focus on risk reporting by the regulators
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Determine the value of funds to be set aside for provision based on data, rather than best guess
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Change the value of funds set aside for provision on a regular basis as risk values change
RISK MANAGEMENT/OPERATIONAL EFFICIENCY
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Allocation of resources to cover events with highest risk
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More efficient resourcing and more risk focused processing model
BUSINESS CASE DEVELOPMENT
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Ability to run scenarios to determine risk values under a different set of circumstances or TOM
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Ability to include Risk Reduction in monetary terms to reflect the real ROI in a business case
TRADING STRATEGY
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Allows traders/fund managers to identify the most potentially profitable events
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Collateral/SBL recall ability based on associated risk
VALUE ADD
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Risk per share values can be passed to clients as a value add service
CARMA RISK MANAGEMENT
The Carma Risk Management modules automatically produce real time, event level Workflow Alerts, as well as organisational and event level Risk Threshold Alerts, adding a new layer of risk management functionality.
As traditional levels of assumption about risk are becoming increasingly unrelaible, this new functionality uses the underlying risk measurement model and risk values to prioritise workloads and improve visibility across the day-to-day management of the associated operational process.
Like the core Carma risk measurement system, the modules sit independently of the underlying Corporate Actions processing system (whether a fully automated processing platform or just Excel spreadsheets), and use the same source data required for the core Carma risk measurement calculation.
This means that Carma can be integrated into any organisation without the need for complex data migrations between systems, reducing implementation times to a matter of weeks.
Both alert types can be configured and maintained by users via the Carma UI and are produced in real time. They are displayed in the relevant user’s alert inbox within Carma, received via email or sent to an external workflow/risk management system.
CARMA HAS BEEN DESIGNED TO PROVIDE FLEXIBILITY TO ANY SIZE AND STRUCTURE OF FINANCIAL INSTITUTION
RISK THRESHOLD ALERTS
The Risk Threshold component produces two different types of alert:
Entity Level – Users can define and configure the value of risk for any part of their organisation at which a Risk Threshold Alert will be automatically produced. The thresholds can be set from an enterprise level (across the entire organisation), a specific business line or region, right down to a specific processing group.
Event Level – Users can define and configure the value of risk for any individual event at which an alert will be automatically produced and allocated to the appropriate user(s). When an event exceeds the threshold, all Workflow Alerts for that event will also be categorised as High Priority within the relevant users Workflow inbox.
As with Workflow Alerts, Carma will produce Threshold Alerts for any future dated events loaded into Carma, allowing managers to plan appropriately for peaks in risk exposure and allocate their resources accordingly.
CARMA ALLOWS USERS TO SET THIER OWN RISK ALERT THRESHOLD AT EVERY LEVEL IN THE ORGANISATION
WORKFLOW ALERTS
The Workflow component covers the full event lifecycle for all ISO event types.
Using the underlying risk measurement functionality within Carma, each workflow alert will include the value of risk associated with the underlying event.
The workflow inbox within Carma can be used to drive daily processing, with the inbox automatically prioritising the tasks that need to be completed, based on their risk values and task deadlines. High Priority workflow alerts will be generated for any events where the Risk Threshold for that event has been exceeded, ensuring users focus on the riskiest tasks, on the riskiest events.
Alternative dashboard views can be configured, such as real time tracking of outstanding daily workflow volumes, enabling managers to ensure all outstanding items have been cleared by close of business.
Carma workflow alerts are produced for future dated events in advance of the risk being realised, allowing managers to plan ahead for times of increased work volume and to allocate their resources more efficiently.
THE PROCESS FLOW IS EXTREMELY FLEXIBLE AND CONFIGURABLE, WITH BESPOKE OUTPUTS CREATED THROUGH THE CARMA RISK ANALYSIS ENGINE
BENEFITS - RISK MANAGEMENT
The new alert functionality fundamentally changes the way Corporate Actions are managed and processed bringing your risk management into sharper focus. For the first time, managers of corporate actions processing groups will have a tool that accurately manage workloads in a truly risk-focused framework. This view into the future of where key risk points are within an organisation allows efficient planning and effective allocation of resources to work on events and tasks where the highest levels of risk are present. This will lead to a reduction in the value of any losses incurred, as well as improving the levels of service provided to your customer base.
BENEFITS
OBJECTIVE RISK MANAGEMENT
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Carma will calculate risk value across all levels of your enterprise and client base, enabling your organisation to recognise and manage the riskiest positions and events
GET AHEAD OF THE REGULATORY CURVE
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Implementing our sophisticated management tool puts you one step ahead of the regulators and competition
INTUITIVE WORKFLOW MANAGEMENT
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Simple but effective, our risk prioritised workflow puts you in control of your organisation’s Asset Servicing risk with a user-configurable and simple-to-use dashboard
PROACTIVE RESOURCE ALLOCATION
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The ability to spot risk peaks ahead of time allows better resource allocation and provides an opportunity to benefit from cross-training
FILL PROCESSING GAPS
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Our game-changing approach works hand-in-hand with your existing technology, avoiding risky system migrations and enhancing your client servicing capabilities
QUICK AND RISK-FREE IMPLEMENTATION
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A step-change from ‘traditional’ multi-year Asset Servicing automation projects, Carma can be implemented in weeks and at no risk to your business
CLIENT SERVICE DIFFERENTIATOR
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Provide clients with valuable risk information to assist in trading strategy and internal risk management