Kamakura Corporation: One-stop-Shop for Risk Management
Follow Kamakura Corporation on :
Dr. Clement Ooi
Amidst the radical developments taking place in BigTech & FinTech, modern CIOs are tapping into the potential benefits of leading-edge technology to remain competitive in the market. Dr. Clement Ooi, President, Kamakura Corporation Asia Pacific, mentions that as digitalization has increased customers' demands, addressing the customers' pain points and discomfort concerning their fragmented data, existing strategy, business activities, and processes often turns out to be a tedious task for enterprises. This is where the global credit rating module of Kamakura called KRIS (Kamakura Risk Information Services) aids banking institutes with extensive risk information on credit risk and interest rates including default probabilities, default correlations, implied spreads and ratings for a wide range of counterparties. KRIS also functions as a service on a platform integrated with the rest of Kamakura Risk Engines.
Further, KRM also provides the term structure of default probabilities that assists users in performing both "Point in Time" and "Through the Cycle" default probability analysis. Firstly, the Point in Time default probability enables users to detect signals in the early stage. "Through the Cycle default probability shows long term average risk for banks to assess the margin of long term loan." Additionally, in the latest KRIS module, the most extended maturity of the term structure of default probabilities is ten years, which makes the "Through the Cycle" default probability the most extended default probability maturity available in the market.
One of the critical differentiators of KRIS from other traditional rating services is that it incorporates the point-in-time macroeconomic drivers and business cycles, near real-time balance sheets, and financial ratios.
This also includes the public ratings of these counterparties, in addition to the near real-time factor attribution analysis, so that users can comprehend the key metrics that lead to counterparties' upgrades, downgrades, or deteriorating creditworthiness or defaults. Other than that, KRIS brings forth a real-time credit monitoring system that functions as an early warning system for detecting distressed and good counterparties before any malicious activities happen. Further, as the ratings profile can be benchmarked on the same screen across the sectors and the individual companies, users garner a fair idea of counterparties' risk profiles with regards to specific sectors or geographic location.
Unlike other solutions in the market, Kamakura addresses both the regulatory requirements and holistic business needs, along with being the only risk management vendor with an established and global PD (ratings) product (KRIS). The firm plays a quintessential role in assessing the entire risk management lifecycle and its impact on the Bank's balance sheet. This pro-active risk management aids companies in identifying, evaluating, and mitigating risks and identifying the challenges and issues before they manifest into adverse events.
The firm also boasts off a cross-functional team who are academics and practitioners and publishes articles about risk models in peer-refereed internationally renowned journals. "The model transparency and governance in Kamakura is a truly unique feature focused on the customer-centric fiduciary responsibilities, and hence provide comfort and stewardship to the banks," adds Dr. Ooi.
He cites the case of RHB Banking Group that implemented KRM to meet regulatory compliance requirements for IRRBB, LCR, and NSFR across all the bank subsidiaries and associates based in Malaysia, Thailand, Labuan, Singapore, Laos, and Cambodia. On top of regulatory compliance, the Bank also used KRM for their internal balance sheet management, i.e., Asset Liability Management (ALM), Liquidity Management and Funds Transfer Pricing (FTP). "The integrated solution empowers the Bank to take a holistic view of their Balance Sheet Management and streamline decision making to avoid contradicting and diverging strategies. All risk matrices share the same stress testing scenarios, allowing the Bank to analyze the impact of each forecasted scenario on LCR, NSFR, IRRBB, ALM, Liquidity Management and FTP, bank-wide or individual subsidiaries."
Since its inception, Kamakura Corporation has developed several proprietary solutions to reinvigorate the risk management space continually. Unlike its peers, the firm believes in "integrating and interfacing" acquired solutions along with adhering to its company's philosophy which says, 'Build and enhance to ensure a seamless evolution for our clients.'