Driving Cost-Effectiveness and Traceability Through an Automated PnL Reporting Tracking Tool

The Case

As a credit institution operating in Germany, the end-customer is liable to implement risk management processes aligned with “Mindestanforderungen an das Risikomanagement” (MaRisk) which defines concrete guidance about implementing § 25a of Kreditwesengesetz. MaRisk is based on Basel II/III international voluntary regulatory framework for financial institutions and aligned with the German legislation. (Implementation of the Basel III is legislative according Directive 2013/36/EU (CRD IV) and Regulation (EU) No. 575/2013 on prudential requirements for credit institutions and investment firms).

As part of MaRisk measures, all credit institutions are obliged to evaluate on a daily basis the market risks in their trading books. To be compliant with the regulation, the customer implemented a business process which requests for each cost centre to provide the P&L reports in a manual manner. The process was based on tracking the email communication from each cost centre. This part of the process is error-prone and time-consuming. In addition, it is evaluated on a yearly basis and can rise negative audit results for the institution in case of poor implementation. Due to that, the customer needed automation of the controlling part of the process, in order to avoid human errors and related risks.

The Reporting Tracking Tool

ScaleFocus’ team provided IT services and support, to build an Excel-based tool which visualizes the reported statuses of the business process controlling the risk evaluation. The tool is integrated with customer’s e-mail system (IBM Lotus Notes) and tracks the appropriate emails from a dedicated for the process mailbox. In case there is a missing evidence for a provided P&L report for the particular day, the tool notifies the end-user. It also provides the ability to automatically send escalation emails to responsible managers when a report is missing and to track the escalations until a case is closed. The tool supports three levels of escalations which can be raised.

The underlying technology is Visual Basic for Application (VBA). The statuses are visualized as a register table and it is highly customizable. The tool enables easy configuration and management of cost-centers, escalation points, bank holidays and escalation templates without the assistance of the IT department.

Achievements and future goals

 
  • Significant time-savings due to automation of routine processes
  • Enhanced cost-effective services
  • Facilitated high delivery quality due to eliminated error-prone processes
  • Reduced time for controlling the process of the daily risk assessments
  • Improved traceability of the process
  • Enhanced reporting ready for annual audits

The Client

The end-customer acts as a local central institution for the cooperative banks. Its mandate is to support the business of the many independent cooperative banks and to strengthen their competitive positioning. The interplay between a decentralized responsibility for customers and a centralized responsibility for products has proved its great benefit.

 

As an internationally oriented corporate bank, the institution serves SME customers directly and provides them with the full range of corporate finance products to fund both operations and investments. In investment banking, the bank is specialized in fixed income and private-customer-focused securities’ services.