Scenario Expansion Manager (SEM)

Financial Institutions currently find it challenging to perform regulatory stress testing with high efficiency because of changing regulatory expectations. However, the scenario expansion methodologies, which are an important component of stress testing, have remained fairly consistent.

Risk identification, limit strategies, and revaluation processes may differ, but there are many similarities across data processes, scenarios, and models used in scenario expansion by financial institutions, which can be leveraged to create a common industry framework.

Most institutions have resource-intensive current processes for scenario expansion. They typically require considerable manual work, are carried out regularly and involve large amounts of market data and documentation.

RISE's SEM platform, which has won the Risk Markets Technology 2021 award for Best Modelling Innovation, provides a centralised framework to expand, analyse and track all regulatory and internal scenarios, while being generic, reusable and transparent.

This framework uses identified similarities to streamline the scenario expansion process, which allows financial institutions to share the operational infrastructure used to conduct modelling activities related to stress testing.

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Value Drivers

Centralised infrastructure
Suite of analytical models

Data management
Diagnostics - tests and controls

Automated documentation
Workflow management with audit trails

Key Benefits

Process enhancements

One-stop solution including data checks, diagnostics, visualisations and workflow
Streamlined expansion process
Improved accuracy of the reported results

Cost savings

Efficiencies by avoiding potential duplication
Automated reusable models and documentations
Benchmarking capabilities providing actionable intelligence

Reduction in operational risk

Transparent structure
Robust approval and model validation process
Reduction in manual efforts

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Scenario Expansion Manager

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FAQs

How is the SEM platform differentiated from other stress testing offerings in the market?

The SEM platform provides a single and all-in-one set of services comprising:

i. Unlimited data management;

ii. Data quality checks;

iii. Analytical models;

iv. Workflow management processes; and,

v. Model documentation

Are the SEM platform’s analytical models transparent to users or will they be a black box?

Comprehensive model documentation is provided as part of the SEM platform, which provides complete transparency into all analytical models used

What inputs will users need to provide into the SEM platform?

Users will need to provide historical time series data for all risk factors modelled in the SEM Platform. Regulatory scenarios will be automatically included within the platform; users need to provide details of all other scenarios

How will the input data from users flow into the SEM platform?

RISE will develop user-specific interfaces to transfer user data into the SEM Platform and then return the final scenarios to the user's downstream systems

What is the process for including additional models into the SEM platform?

Additional models are developed using the 'R' statistical language and are then incorporated into the platform. Individual financial institutions can request that proprietary models be developed for their exclusive use

What checks will be applied to the final scenarios?

The SEM Platform checks all scenario outputs to ensure consistency, based on statistical analysis, including checks on whether output scenarios are coherent with input shocks