Financial Services and Treasury Risk Management

Capital is the scarcest resource in the financial services industry. Chief executives across financial institutions, e.g. banks, non-banking financial companies are actively involved in capital management and efficient allocation of capital as per business needs. Capital Management involves major aspects such as Stress Testing, Internal Capital Adequacy Assessment Process (ICAAP) and Internal Liquidity Adequacy Assessment Process (ILAAP).

Our Financial Risk & Regulations team supports financial institutions in reviewing and framing of Stress Testing policy for credit risk, market risk, liquidity risk and reviewing and development of ICAAP/ILAAP frameworks.

Today, risk management has become a dynamic and global field that has a far-reaching impact on the banks & FIs. Credit risk is one of the key risks that banks, FIs and to a certain extent corporates are exposed to in an increasingly complex environment. Our approach helps business leaders embed a proactive and dynamic risk management capability and mindset into leading practices in credit risk, right from strategic planning to implementation. Our areas of expertise include - development and review of credit risk management framework including governance, credit risk policy transformation, credit risk appetite and tolerance review, credit risk rating/ scoring model development, monitoring and validation, IFRS 9 ECL policy and model development/review.

Corporates today are scaling business with the objective to generate highest value for their stakeholders. As businesses grow, organisations are required to upgrade treasury processes to better support their growth, transition treasury from a historic cost centre model and bring processes in line with best practice. This comes with various risks associated with movements in foreign exchange, interest rate and commodity prices along with liquidity management.

PwC’s Financial Risk & Regulations team guides and supports clients to establish a treasury framework that is aligned with the growing business needs.

Market Risk is generally defined as the risk of the mark to market value portfolio, instrument or investment increasing or decreasing as a result of volatility and unpredicted movement in market valuations. Banks are faced by four major market risks; Interest Rate Risk, Foreign Exchange Risks, Equity Price Risks and Commodity Price Risks.

Our Market Risk Management team analyses each risk factor as per a predefined operating model and engages with key stakeholders at the bank to map the entire projection process, understand the underlying modeling approaches, assumptions and their associated limitations.

Actuaries are the backbone of insurance companies and are involved in various aspects of insurance business. The service includes product development, pricing of insurance products, valuation for statutory, shareholder purpose and accounting as IGAAP, IFRS 17, risk management and asset liability management. In addition, the actuarial capability helps and support clients in performing required regulatory reviews, due diligence for potential buyers/sellers, managing their insurance liability requirements, transiting to new regulatory and market requirements and offering new products to its customers.

Climate change poses significant tail risks with catastrophic system-wide consequences to the stability of the entire financial system. There is a growing realisation across businesses and investors to be proactive in incorporating climate risk considerations along with the government which needs to include climate change resilience initiatives in its policies. Climate change-related risks act as new risk drivers which change the characteristics of prevailing risks and affect how those risks impact financial institutions. Climate change developments will therefore require changes in the way financial institutions manage and mitigate their prevailing risks.

Our Financial Risk and Regulations team supports financial institutions adopt a step-by-step approach in baselining climate change related risks, creation of a strategy and governance framework and help integrate climate change related risks with existing risk management framework of the organisation.