CREDIT VALUATION ADJUSTMENT ADVISORY
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CREDIT VALUATION ADJUSTMENT (CVA) CONSULTING

One of the most significant changes in recent years to the way in which counterparty risk is managed within clients is the emergence of Credit Valuation Adjustment (CVA) functions and processes.

CVA has moved the focus of counterparty risk management from being primarily focused on internal control and limit management to active exposure management and hedging.  Whereas previously counterparty risk management was largely the domain of internal credit risk management departments, CVA functions most commonly sit within the front office but have a wide range of additional interested stakeholders (such as Credit Risk Management, Market Risk Management, Finance, Sales etc). This makes the implementation of CVA organisation, systems and processes highly complex.

DFRC works with clients to build and enhance their CVA functions in order to design and deliver industry best practice. Our overall consulting offering to the CVA industry forms the DFRC Delivery Lifecycle for CVA.

COLLATERAL MANAGEMENT CONSULTING

Collateral management has become a business critical function within all financial institutions from multiple perspectives – such as risk management, optimization of funding costs and operational streamlining.

The post-crisis regulatory developments (arising from the G20 agreements) have served to significantly increase this importance. Financial institutions are responding by re-engineering their end-to-end collateral management processes to create integrated organisational structures, processes and systems which are able to effectively manage both counterparty risk and optimize funding costs.

This is a major challenge for many organizations, requiring amongst other things:

  • Integration across collateral silos including OTC and Exchange Traded Derivatives, repo and securities lending
  • The set-up of enterprise wide secured funding capabilities within the front office covering collateral, repo and securities lending activities
  • The implementation of new systems capabilities to support effective management and optimization of collateral and firm-wide inventory
  • Full operational straight-through processing of the operational collateral process from margin calculation through to margin call through to settlement
  • The ability to calculate initial margin in a robust and transparent manner

DFRC works with clients, hedge funds and asset managers to enhance their collateral management functions in order to design and deliver industry best practice.  Our overall consulting offering to the collateral management industry forms the DFRC Delivery Lifecycle for Collateral Management.

The DFRC Delivery Lifecycle for Collateral Management encompasses the following specific services and tools:

  • Business Case Definition for Collateral Management
  • Collateral Management Benefit Assessor
  • Target Ooperating Model Definition for Collateral Management
  • System Selection and Solution Definition for Collateral Management
  • Collateral Management  System Select
  • Business and Functional Requirements for Collateral Management

In addition to our services for financial institutions we have a range of services for system vendors and outsourced providers of collateral management services