Smart About Risk  
References of consulting

References of Consulting

Selected references  

Air Bank a.s.
Česká spořitelna, a.s. (Erste Group)
Českomoravská záruční a rozvojová banka, a.s.
ČEZ, a.s.
Hypoteční banka, a.s. (KBC Group)
Investiční kapitálová společnost KB, a.s. (Amundi Group)
Komerční banka, a.s. (Société Générale Group)
Kooperativa pojišťovna, a.s. (Vienna Insurance Group)
Moravia IT, a.s.
MONETA Money Bank, a.s.
Nova KBM d.d.
OKULA Nýrsko, a.s.
OTP Banka Slovensko, a.s.
PSJ holding, a.s.
RWE Transgas Net, s.r.o.
sanofi-aventis, s.r.o.
SKB Banka, d.d. (Société Générale Group)
Tatra banka, a.s. (Raiffeisen Bank International Group)
UniCredit Bank Czech Republic, a.s.
Západočeská energetika, a.s.  
Železničná spoločnosť Slovensko, a.s.

Selected projects

Selected projects in the area of credit risk

SKB banka d.d. Ljubljana: Rating models development, 2021

ARM cooperated with SKB on the development of statistical rating models for the credit assessment of commercial clients and private individuals. The rating model use behavioural and financial information. The final rating is obtained by aggregating outputs from the behavioural and financial component.

The model development process has the following stages:

  • data cleaning and processing
  • data description and transformation
  • analyses of client segmentation (based on the analysis ARM determined 2 separate models for the individual subsegments of the retail/corporate clients)
  • univariate and multivariate analyses
  • model estimation and selection (using logistic regression with WoE transformation)
  • model performance and stability testing
  • model calibration
  • aggregating model concept and estimation

The model development process was aligned with the SKB and OTP Group methodology of model development and considered expert opinions provided by both SKB and ARM. The rating models together with detailed documentation was prepared using the R software. All models and their components were presented to the SKB representatives on the executive summary meeting.

"Our cooperation with ARM met all our expectations. The provided outputs are detailed, comprehensive and of a high quality. We greatly appreciate that ARM regularly discussed and confirmed the individual aspects of the model development with us." Dejan Vičič, Head of Risk Portfolio Monitoring
 

SG Equipment Finance Czech Republic s.r.o.: Cooperation in the development of a behavioural rating model, 2020

ARM has cooperated with SG Equipment Finance Czech Republic s.r.o. in the development of a behavioural rating model to regularly update the credit rating of clients with a lower level of exposures. The outputs of the model can be used to predict the probability of default at the client level over a one-year horizon.

ARM's cooperation included:

  • data preparation and cleansing for the development of the statistical model,
  • selection of appropriate variables based on univariate and multivariate analysis,
  • design of the model together with verification of its performance and stability,
  • validation of the model on out-of-sample data.

A Python script was also provided to automatically generate detailed documentation in HTML format. During the development process, the assumptions of the statistical procedures used were continuously verified. The model was developed to comply with both the general theoretical requirements and the requirements defined by the group procedures.

"We are very satisfied with the quality of the service delivered by ARM and with the smooth course of our meetings throughout the cooperation. I particularly appreciate the flexible and willing incorporation of our ongoing suggestions and comments." Jan Endrle, IRBA project

 

Českomoravská záruční a rozvojová banka, a.s., Validation of PD calculation for the purposes of IFRS 9 and subsequent cooperation in the implementation of the validation findings, 2019-2020

In the first phase of the project, ARM validated the calculation of the probability of default (hereinafter “PD”) used for determining provisions under IFRS 9 for small and medium-sized enterprises. ARM assessed the correctness of mathematical and statistical approaches for the calculation of PD, the legitimacy of the accepted assumptions  and their suitability for the calculation of PD within the provision determination. At the same time, ARM assessed the accuracy and completeness of the methodology, the quality of the input data for the calculation of the PD estimate and the back-testing of PD estimates in the analysed historical horizon.

The output of the cooperation was a final report containing an overview of findings in the above‑mentioned areas and related recommendations. ARM also provided a technical documentation containing performed analyses and simulations of the impact of selected recommendations.

In the second phase of the project, ARM cooperated with ČMZRB on the implementation of the validation findings. ARM specified the modifications to software used for the calculation of the PD parameter and discussed it in detail with the programmers. ARM provided professional supervision over the implementation of individual recommendations and verified the correctness of their implementation. The verification also included quantification of the impact of the changes made.

"Advanced Risk Management, s.r.o. supported its findings by a detailed analysis of the PD estimate, which included not only verification of the accuracy of the current model, but also simulated the effect of possible modifications and extensions of the current model. The outputs are prepared very comprehensively. ARM further ensured that all findings were properly implemented. We are very satisfied with the work done by ARM." Ing. Pavel Fiala, Deputy Director-General

 

SKB banka d.d. Ljubljana, Modelling of non-maturity deposits, 2020

ARM refined a behavioural model for SKB banka d.d. describing behaviour of the non-maturing deposits of retail and corporate clients, in particular of current and saving accounts. The aim of the model was to capture not only the withdrawal behaviour of clients, but also the reaction of the bank when changing the client interest rates in context of changes of market interest rates. 

The outputs of the model may be used for liquidity management as well as for measurement of interest rate risk in the banking book (IRRBB). Main modelled outputs:  
  • identification of the volatile and stable part of deposits, 
  • run-off profiles describing stable part of deposits for liquidity risk gap analysis, 
  • repricing profiles describing core part of deposits for allocation to repricing gaps within the IRRBB measurement and reflecting the changes in market interest rates,
  • additional expert adjustments of the profiles for purposes of the Supervisory outlier test.  

The model is detailly documented in the methodology that describes not only the individual parts of the model and all applied methods, but also all related processes (e.g. model operation and recalibration). 

ARM delivered a model prepared in the programming language Python that automatically generates full documentation in HTML. The model also exports relevant results into MS Excel file. Another MS Excel file serves as source of input data and parameters of the model. The usage of the tool, its maintenance and structure of applied classes and functions in Python are described in the user manual. 

"Solution developed by ARM was efficient, consistent with the previous model, robust to changing market conditions as well as user friendly. Thank you for all your support and guidance.“ Nataša Mohorčič-Zobec, CFO 

 

SKB banka d.d. Ljubljana, Cooperation on the development of non-retail rating model, 2019-2020

ARM has participated in the development of the non-retail rating model for SKB. The model was designed for SME as well as standard corporate exposures. The model structure included financial and non-financial parts. 

First, ARM performed validation of the financial model that included evaluation of logical and factual correctness of the model, assumptions of the model, approach to model calibration etc.

Further, ARM developed the non-financial rating model and rules for the aggregation of financial and non-financial models to produce the overall rating assessment of corporate and SME clients. 

The non-financial rating model was developed based on data from questionnaires, behavioural data and financial trend data. The model was developed in the R software. ARM prepared the model formula together with complete model documentation. The documentation was prepared in the form of both detailed technical version and executive summary. 

“I would like to thank ARM for the cooperation in non-retail rating model development. The cooperation met all our requirements, as all outputs were delivered in time and in the required quality despite the tight deadlines.” Dejan Vičič, Head of Risk Portfolio Monitoring

 

Poštová banka, a.s., Development of activities and processes in the area of risk modelling, 2019-2020

ARM cooperated with Poštová banka, a.s., in the development of activities and processes in the area of risk modelling. The cooperation consisted mainly in the preparation of a framework for the developmental methodology of credit models and the development of a template scoring model in one selected retail clients‘ segment.

The methodology of credit models covers mainly:

  • definition of the purpose of the model and the requirements imposed on it,
  • preparation of a data sample for model development and testing,
  • univariate and multivariate data analysis,
  • estimation and model choice,
  • evaluation of model stability and performance,
  • model calibration.

Along with the methodology, scripts in the Python language were also prepared, which enable the calculations and estimations described in the methodology to be performed. The scripts also enable automated preparation of the analytical and technical documentation of the developed model.

"The delivered outputs (methodology and the scripts) will be very helpful to my team in the development of other credit models. Cooperation with ARM was again at a high level of professionalism." Director of Retail Risk Management

 

Pražská energetika, a.s., Update of the methodology for credit risk management, 2019

ARM updated for Pražská energetika, a.s., (hereinafter “PRE“)  the methodology for managing the credit risk of B2B customers. ARM updated the methodology in the section focused on internal models for credit risk management, especially in the areas of:

  • model governance,
  • the use of models in the assessment of counterparties,
  • monitoring of models and their backtesting,
  • rules and procedures for recalibration of models.

At the same time, based on the updated model for predicting the clients´payment behaviour, ARM revised the algorithm used to calculate the expected number of days past due.

"Cooperation with ARM in updating the methodology for credit risk management met our expectations. ARM prepared a proposal, which we discussed together. Based on the proposal and discussions, ARM designed the final methodology. We appreciated the knowledge and experience of ARM experts with credit risk management and internal models. " Jan Jeřábek, Head of Sales Support PRE
 

Poštová banka, a.s., Assessment of Scoring Models, 2019

ARM performed expert verification of retail scoring models used in Poštová banka, a.s.
The verification covered both statistical models as well as models based on expertly set rules, and covered in particular the following areas:

  • expert evaluation of the logical and factual correctness of the model documentation,
  • assessment of data processing methods, including the handling of missing and outlier observations, procedures used for data transformation and data storage procedures,
  • assessment of the choice of explanatory variables,
  • expert evaluation of the predictive ability / power of the model,
  • the method of models calibration on the so-called Master scale used by Poštová banka,
  • expert evaluation of the method and quality of internal monitoring, validation and management of scoring and rating models and their implementation.

The outcome of the cooperation was a report describing the findings and formulating ARM’s recommendations. The findings and recommendations were classified into several categories in terms of their importance and impact on the overall functioning of the bank. The report also set out the basis for verifying the models. The overall evaluation of the verified models was presented in the managerial summary.

"ARM's recommendations were clear, comprehensible and well-structured and they helped us identify priority areas for further development of scoring models." Director of Retail Risk Management
 

Ezpada s.r.o., Developing a rating model for large corporate counterparties, 2019

ARM has developed a rating model for the Ezpada s.r.o. company to assess the credit risk of large corporate counterparties. The rating model, based on the input data on financial and non-financial characteristics, assigns the counterparty an internal rating, which represents the level of counterparty credit risk and the probability of its default in one-year term. For the purpose of developing the rating model, ARM prepared a list of financial and non-financial indicators that were tested in terms of their ability to differentiate the level of credit risk of each counterparty. The most appropriate indicators were included in the model. ARM also created an internal rating scale and calibrated the developed model on this scale.

"Cooperation with ARM met our expectations. The rating model provides a robust tool for managing counterparty credit risk.", Michal Papež, Head of Risk and Compliance

 

Česká spořitelna, a.s., Co-sourcing of audit reviews focused on the validation of rating systems and risk parameters PD, LGD a CCF, 2018

ARM together with the internal audit department of Česká spořitelna, a.s. (hereafter „ČS“), participated in audit reviews of validation protocols on rating models and risk parameters PD, LGD a CCF. The main aim of the cooperation was to assess the compliance of the validation protocols of ČS and Stavební spořitelna České spořitelny, a.s., with the rules defined in the relevant group methodologies. ARM assessed the structure of the validation protocols as well as the way how the individual validation methods were assessed and the accuracy of the evaluation. In its review, ARM especially focused on the validation of the following aspects:

  • Completeness – meaning that all relevant information was included.
  • No significant errors affecting the overall evaluation of the validation or a particular validation method were present.

ARM prepared a final report summarizing all audit findings. ARM classified the severity of each finding reflecting its impact on the validation results and also provided recommendations on how to remove deficiencies.  

 

SG Equipment Finance Czech Republic s.r.o., Gap Analysis and Roadmap for Implementation of the A-IRB Approach, 2018

ARM has performed a Gap analysis for SG Equipment Finance Czech Republic, s.r.o., (hereinafter SGEF) within the project to implement the Advanced IRB Approach. The Gap analysis assessed the current state of SGEF with regard to current and upcoming regulatory requirements laid down in CRD, CRR, related technical standards and guidelines and proposed a set of steps to close the identified gaps. The assessment was performed in the following areas:

  • IRB portfolio segmentation
  • Default definition
  • Rating system and PD model
  • Credit risk mitigation
  • LGD calculation
  • Other processes and activities (e.g. RWA calculation, COREP, internal audit, IFRS 9, ICAAP, corporate governance, IT systems)
Based on the Gap analysis, ARM estimated the workload and costs for individual gaps needed to ensure the Advanced IRB Approach implementation in targeted horizon. The capacities were allocated not only to individual departments of SGEF, but also to departments of the parent company and to headquarter. The estimation of man-days was subsequently used for preparation of an implementation plan where ARM took into account dependence of the individual activities. Beyond the scope of the project, ARM also prepared a tool for calculation of payback period.
All ARM’s outputs met our expectations and are very helpful for preparation of the detailed project plan of the A-IRB implementation. ARM very quickly understood our needs and goals. We very appreciate that all outputs were delivered in a high quality, easy to understand and moreover, within agreed deadlines even during such a demanding project.” Head of Risk  

 

Moravský peněžní ústav - spořitelní družstvo, Pre-scoring tool for operational financing, 2017  

ARM developed a pre-scoring tool assessing the creditworthiness of corporate clients interested in operational financing. ARM designed in cooperation with MPÚ a set of financial and non financial characteristics of the client and provided the expert settings of model KO criteria. The pre-scoring tool enables not only the assessment of clients’ creditworthiness, but also indicates the credit limit for pre-approved clients. Two versions of the pre-scoring tool were created in order to satisfy both, the sales department (applying manual input of individual client) and risk management department (taking the advantage of advanced batch processing). In order to facilitate the analysis of pre-scoring results ARM developed and delivered also a tool enabling demonstration of the effect of user-defined values of KO criteria.
I appreciate the drive of Advanced Risk Management, s.r.o., team to finalize the project as well as their understanding of our needs. The pre-scoring tool facilitates our work and saves time of risk management and sales employees.“ Head of Risk Management, Moravský Peněžní Ústav – spořitelní družstvo  
 

UniCredit Bank Czech Republic and Slovakia, a.s., Development of a prescoring model for assessment of riskiness of clients, 2017

Based on statistical analysis of anonymized external data and data of UniCredit Bank Czech Republic and Slovakia, a.s. (hereinafter referred to as “UCB”) concerning particular contractual parameters of clients, ARM has created a prescoring model for assessment of riskiness of clients within the process of providing pre-approved consumer loans. ARM created the model based on logistic regression. In order to achieve an optimal model quality, the model was developed on a development sample and its predictive ability was back‑tested on a validation sample. A part of the development of the model was its calibration to a target central tendency and additional expert modification of the initial model was performed after the consultation with UCB. The output of the cooperation was a protocol in English language which contained information about development of the model and its specification. At the same time, the results of the model were presented not only for the development and validation sample, but also for actual sample of clients. Technical instructions for implementation of the model were an integral part of the protocol.

Cooperation with Advanced Risk Management, s.r.o. fulfilled our expectations, work on the project and its output was realized in accordance with the requirements, on time and in a good quality. I especially appreciate the ARM’s initiative in quality control and processing of external data used in development.” Manager of Rating and Scoring Models

 

Moravský peněžní ústav - spořitelní družstvo, Expert assessment of the scoring model for factoring, 2017

ARM expertly assessed the scoring model that Moravský Peněžní Ústav – spořitelní družstvo (hereinafter “MPÚ”) introduced for the purpose of pre-approval of factoring credit lines for individual clients. The cooperation involved in particular the following areas:

  • revision of the documentation of the scoring model and related methodologies,
  • assessment of suitability of model’s input characteristics selection,
  • assessment of settings of the model parameters and
  • check of the functionality of the calculation tool.
The ARM team personally presented the output report that included findings regarding the model and its documentation ordered by their severity, supplemented by recommended processes leading to improvement of the model, simplification and clarification of its documentation and elimination of inconsistencies in the underlying materials. A part of the cooperation was a modification of the methodology for risk margin calculation. ARM proposed a method for calculation of the risk margin for regressive and non-regressive form of factoring in a way that the method is consistent with the current methodology used for other commonly offered MPÚ’s products.

The company Advanced Risk Management, s.r.o., is a reliable partner for us. Just as in other projects we have cooperated on with ARM, all outputs were delivered on time and in the expected quality.” Risk Management Director

 

UniCredit Leasing CZ, a.s., GAP analysis of processes of UCL CZ and SK regarding the regulatory requirements for application of A-IRB approach, 2017 

ARM assessed processes and methodologies of UniCredit Leasing CZ, a.s., (hereinafter UCL) in terms of completeness, internal consistency and suitability for A-IRB approach. In addition, ARM evaluated compliance of internal processes and methodologies with regulatory requirements (CRD IV, CRR, Decree No. 163/2014 Coll. and EBA Guidelines for IRB, especially for default definition and for estimation of risk parameters). The cooperation involved following areas:

  • IRB portfolio segmentation
  • Calculation of RWA for capital requirement
  • Rating systems
  • Approval process
  • Corporate governance
  • Default definition
  • Credit Risk Mitigation
  • Calculation of PD
  • Calculation of LGD
  • Calculation of CCF
  • Other related processes and activities (project management, role of internal audit, preparation of request for approval to use IRB approach, risk margin, ICAAP, risk appetite, COREP and IFRS 9)
The ARM’s recommendations were formulated in detail and comprehensibly. In addition, they were ranked according to their importance; it helped us to better divide the work in the area of IRB implementation.” Head of Strategic Risk and Portfolio Management  

 

UniCredit Leasing CZ, a.s., Client segmentation in IRB approach, 2017

ARM assessed the methodology of UniCredit Leasing CZ, a.s., (hereinafter “UCL”) for client segmentation under the IRB approach. Additionally, ARM organized a workshop in UCL to present its findings and recommendations. The recommendations took into account the requirements of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms.
We were very satisfied with ARM’s approach. They were willing to split the workshop into 2 subsequent parts, it helped us to better capture the identified shortcomings.” Head of Strategic Risk and Portfolio Management

 

Česká spořitelna, a.s., Assessment of the validation process of credit risk models, 2015 - 2016

ARM verified validation process of credit risk models. Subject of the audit were both validation protocols of each scorecard and validation protocols of risk parameters. Within the project ARM verified the following:

  • Compliance with prescribed schedule for validations
  • Compliance with evaluation criteria defined by methodology (given by type of scorecards and other verified models) and
  • Whether validation protocols fulfill all requirements of template defined by the methodology
ARM output was a summary output protocol of audit created in MS Excel. 

 

Nova Kreditna banka Maribor d.d., Assessment of NKBM’s revised methodologies on default definition and IRB segmentation, 2015

The goal of the cooperation between ARM and NKBM was the assessment of accuracy, consistency and correctness of NKBM’s revised methodologies on default definition and IRB segmentation. During the cooperation ARM verified, whether the rules specified in the internal methodologies on default definition and IRB segmentation are accurate and in line with generally accepted principles. Furthermore, ARM checked the compliance of internal methodologies with relevant regulation (CRD IV, CRR and relevant EBA Guidelines).  

 

Česká spořitelna, a.s., Validation of scorecards in Specialised Lending model based on methodology, 2015

The object of cooperation between ARM and the risk management department of ČS was to perform validation of the scoring model used in the Specialized Lending segment of the corporate asset class (hereinafter "SL model"). ARM performed verification of the SL model based on prescribed ČS’s methodology and subsequently ARM formulated an expert opinion on the overall functioning of the SL model. 

 

Česká spořitelna, a.s., Risk Based Pricing – Verification of methodology and technical realization of risk margin calculation, 2015

ARM cooperated with ČS’s internal audit on verification of risk margins calculation included into loan prices. During the realization of the cooperation, ARM focused especially on the following:

  1. expert evaluation of methodology for determination of risk margin and its compliance with generally accepted principles,
  2. evaluation of consistency and logical correctness of input parameters,
  3. verification of correctness of risk margin calculation on agreed audit sample,
  4. verification of the process of risk margin back testing and
  5. verification of inclusion process of risk margin into loan prices.
The output of the contract was an output report which contained individual recommendations of ARM to verified areas.  

 

Nova Kreditna banka Maribor d.d., Gap Analysis of the A-IRB Approach implementation in the segments Corporate and Retail, 2014-2015

The goal of the cooperation between ARM and NKBM was the creation of implementation plan (hereinafter "Roadmap") for Advanced IRB Approach. As a basis for the Roadmap ARM performed a gap analysis. The objective of the gap analysis was comparison of the current state of NKBM in relevant areas in relation to actual banking regulation (CRR and relevant documents published by EBA). The assessed areas were the following:
  1. default definition,
  2. portfolio segmentation,
  3. rating system,
  4. techniques of credit risk mitigation (CRM),
  5. risk parameters estimation (PD, LGD a CCF),
  6. other related processes (e.g. RWA calculation, COREP reporting, Risk Based Pricing).
For each identified gap ARM estimated the workload and related costs of NKBM for its solving. The Roadmap took into account logical sequences of individual activities and also capacities of departments involved in the IRB Approach implementation.  

 

Česká spořitelna, a.s., Audit of IRMA system, 2014

ARM performed verification of IRMA system which is used by ČS to determine asset class, client's internal rating and classification of receivables. During the realization of the contract, ARM has verified whether:
  • the settings of IRMA system are in compliance with ČS methodology and generally accepted principles,
  • the settings of IRMA system is compliant with the regulatory requirements,
  • the technical realization of IRMA system is compliant with ČS methodology based on own independent calculation,
  • internal documentation of ČS contains all relevant information for verification of system functioning by an independent third party.
The output of the contract was an output report prepared in Czech and English which contained recommendations of ARM to verified areas.

 

LeasePlan Česká republika, s.r.o., Creation of expert score card, 2014

For the company LeasePlan Česká republika, s.r.o., ARM has created an expert score card for evaluation of operative leasing requests of natural persons – entrepreneurs. Part of the cooperation was identification of entry data necessary to be included in the operative leasing request. The entry data were separated between those inputted by client when creating the request in web interface, those automatically acquired from the database of Non-Banking Client Information Register (NRKI). The output of the contract was an expertly set score card reflecting risk appetite of LeasePlan company, detailed description of individual entry data, algorithm of score calculation and methodology for acquiring and evaluation of the information from NRKI.

 

Moravský Peněžní Ústav - spořitelní družstvo, Methodology for determination of loan interest rate, 2014  

The subject of cooperation between ARM and MPÚ was creation of new methodology for calculation of risk margin in the process of loan product pricing. Furthermore, ARM prepared for MPÚ a pilot calculation of risk margin in given client segment (based on prepared and mutually approved methodology) which is subsequently used in MPÚ as a basis for calculation of risk margin also in other segments. During realization of the contract, ARM used not only available historical data of MPÚ, but also own expert assessment of selected parameters necessary for calculation of client’s risk margin. Subsequent cooperation covered expert assessment of complete methodology of loan product pricing.  

 

Hypoteční banka, a.s. (KBC Group), Calculation tool for verifying efficiency of interest risk hedging, 2013

ARM has created a calculation tool for Hypoteční banka, a.s. to verify the efficiency of interest risk hedging on a regular basis using MS Excel. The created tool not only included valuation of individual hedged and hedging instruments, but also assessment of the efficiency of individual hedging relations using the prospective and retrospective method according to the provided Hypoteční banka, a.s. methodology. The outputs from the tool also contained data for regular reporting for hedge accounting purposes.
"We were not only satisfied with the professionally performed work and a very well arranged configuration of the tool, but also with the highly client-oriented and constructive approach throughout the project." Financial Reporting and Accounting Department Manager, Hypoteční banka, a.s.

 

Česká spořitelna, a.s. (Erste Group),Verifying the implementation of the risk parameters calculation, 2013

ARM, in cooperation with the internal audit department of Česká spořitelna, a.s., carried out a verification of the calculation of the PD, LGD and CCF risk parameters, which are used for calculating the capital requirement for credit risk. The subject of the validation was to verify whether:
  1. the ČS's methodology, used for the calculation of risk parameters, is in accordance with regulatory requirements, 
  2. the implementation of the risk parameters calculation is made in accordance with ČS's methodology and the generally accepted statistical principles,
  3. the risk parameters in the audit sample agree with the ones independently calculated by ARM, which uses the ČS's calculation methodology,
  4. the internal ČS's documentation contains all the relevant information (particularly descriptions of each step of the methodology, desired outcomes, results obtained, etc.) so that is can be used by an independent third party to verify the calculations of the risk parameters.
ARM carried out the analysis in an independent tool and then compared their results with the results of ČS. The output report also contained ARM’s recommendations for each tested area.

 

Česká spořitelna, a.s., Evaluation of model used for calculation of valuation and VaR of bonds, including credit spreads, 2012

ARM performed verification of correctness and accuracy of inclusion of credit spreads into valuation of bonds and calculation of Value at Risk. The object of verification was both methodical correctness of models used and also their technical realization in the ČS's environment. The output of the consulting was a report containing results of individual verifications and related ARM's recommendations.  

 

Slovenská sporiteľna, a.s. (Erste Group), Verification of the credit margin calculation in the scope of setting the credit price, 2012

The subject of our cooperation was to verify the credit margin calculation for the credit products of private clients of Slovenská sporiteľna, a.s. ARM verified the group methodology of ERSTE Group and, subsequently, the internal methodology of SLSP. Part of the order also included verification of the surcharge level set for the selected segments of the credit portfolio, including verification of the logical correctness, consistency and reliability of input data.
 

SKB Banka d.d. (Société Générale Group), Development of an implementation plan for advanced IRB approach, 2009

ARM cooperated with SKB Banka d.d. ('SKB') on the development of the implementation plan concerning the advanced IRB approach for the calculation of capital requirement for credit risk. Within that scope, ARM conducted workshops with responsible experts at SKB and analyzed SKB's situation, processes and procedures, data sources and software applications. Based on that analysis, ARM developed an implementation plan of the advanced IRB approach including a detailed description of individual steps that need to be adopted and a proposal of changes in the bank's IT systems, etc. The plan was subsequently discussed and accepted by the National Bank of Slovenia.
 

Česká spořitelna, a.s. (Erste Group), Validation of IRB approach, 2006, 2010

Within the scope of cooperation with Česká spořitelna, a.s. ARM validated parts of the model for the calculation of capital requirement for credit risk through IRB approach. The subject of validation was mainly the calculation of risk factors: probability of default - PD, loss given default - LGD and credit conversion factors - CCF. ARM focused on the quality and integrity of input data, suitability of used statictical approches and calculation procedures, but also on technical realization of the calculation and qualitative criteria of the model.

Selected projects in the area of operational risk 

Exportní garanční a pojišťovací společnost, a.s., Consultations on operational risk management, 2020

ARM prepared an analysis and independent assessment of the current operational risk management system for Exportní garanční a pojišťovací společnost, a.s., (EGAP). As part of the analysis, ARM prepared draft recommendations for the further development of methods and procedures used in operational risk management, for example in the area of ​​key risk indicators, scenario analysis and reporting. The consultations also included the preparation of a draft procedure and recommendations for the acquisition of a new software tool for managing operational risk.
The output report describes the results of the analysis and details all the recommendations.
"Cooperation with ARM on the analysis of the operational risk management system helped us to formulate the main priorities for the development of managing this risk in the next period. We greatly appreciate ARM's experience with operational risk management. The prepared Output Report is a very good guide for us on how to proceed in the development of our internal system ", Silvie Goldscheiderová, Executive Director of Risk Management Division and Director of Risk Management Section.

 

Equa bank a.s., Implementation of the Standardized Approach (TSA) for operational risk, 2017

ARM has participated in the transition of Equa Bank, a.s., from the Basic indicator approach (BIA) to the Standardized approach (TSA) under the CRD IV framework for operational risk. As a starting point of this project, ARM organised an introductory workshop which concentrated on the TSA approach, the methodology for the calculation of capital requirements, and the qualitative requirements on processes related to the calculation. In addition, ARM, together with the experts from Equa Bank and based on its accounting methodology, developed the methodology for the calculation of capital requirements by using the TSA approach and complying with CRD IV and related legislation. The methodology included the procedure for the assignment of bank’s activities to business lines.

Advanced Risk Management, s.r.o., has helped us to prepare the methodology for the calculation of capital requirements exactly according to our agreement. Thank you for your help. We look forward to cooperation in the future.” Head of Enterprise Risk Department

 

J & T BANKA, a.s., Audit of operational risk processes, 2017

ARM conducted an audit of the operational risk processes in J & T BANKA, a.s.. Based on the revision of methodologies in the area of operational risk, ARM assessed compliance with regulation requirements and with common practice. The output of the contract was an output report which contained findings and suggested recommendations.
"The output of the audit met our expectations and helped us to identify areas for further development of operational risk management.” Head of risk management, J & T BANK, a.s.  

 

GE Money Bank, a.s., Cooperation with the revision of processes and methodologies development in the area of operational risk management for GEMB, 2015

ARM performed revision of selected processes in the area of operational risk management of Moneta Money Bank (before GE Money Bank, a.s., "GEMB"). The cooperation was focused especially on the RCSA process and risk analyses realized in other areas beyond this process. ARM provided GEMB with know-how when proposing individual rules for the process of determination and assessment of GEMB’s risk appetite for operational risk. Individual principles and rules were designed to comply with other areas where the risk appetite is determined.
Primary the subject of the cooperation between ARM and GEMB was to:

  1. provide know-how for proposing principles and rules for GEMB’s risk appetite statement in the area of operational risk,
  2. revise existing risk classification model used for the evaluation of the frequency and impact of identified risks,
  3. revise individual fields of existing templates used for recording of identified risks and related information in the RCSA process,
  4. develop methodological approach for risks identification and evaluation within the RCSA process,
  5. revise existing templates and creation of new templates for risks identification and measurement in 4 defined areas (outsourcing and suppliers, projects, processes, IT systems) and development of methodological approach,
  6. create training materials

 

GE Money Bank, a.s., Development of operational risk management, 2014  

ARM has implemented a project in GEMB for development of operational risk management regarding creation of gap analysis identifying compliance of internal methodology with requirements of currently valid CNB Decree No. 163/2014. The output of this part of contract was a description of individual gaps, including suggested adjustments in operational risk management system which would lead to their removal.
Furthermore, ARM has prepared for GEMB a workshop regarding possible ways of stress testing of operational risk and subsequently formulated principles of stress testing for internal GEMB directive.
In the final part of the contract, ARM prepared materials for regular training of GEMB employees in the area of identification of operational risk events. The goal of the training is to increase the awareness about operational risk in GEMB and provide concise instructions for identification and recording of operational risk events.  

UniCredit Bank Czech Republic, a.s., Validation of data used under AMA approach, 2008

ARM worked together with the operational risk management department of UniCredit Bank Czech Republic, a.s. (‘UCBCZ’) on the validation of the internal model of operational risk measurement under the AMA approach, with a focus on the quality of internal data and on the collection process of internal events of operational risk. During this validation, ARM has studied the methodology of UCBCZ, which describes how internal events of operational risk are collected (i.e. mainly internal regulations, procedures, risk catalogue) and verified, whether the quality of internal data is sufficient (control of completeness and formal accuracy of records about operational risk events). Subsequently, main priorities were determined for the suggested completion or corrections according to the importance of the mismatch with the internal and external methodology.

 

Komerční banka, a.s. (Société Générale Group), Development of a local AMA model, 2008

ARM has developed for Komerční banka, a.s. a local internal model for the calculation of expected and unexpected loss (and therefore of the capital requirement) for operational risk and supplied KB with a software application for the calculation of those risks. The internal model is in compliance with requirements of the Decree of CNB no. 123/2007 Coll.

 

Tatra banka, akciová spoločnosť (RZB Group), Consultation in the area of the AMA approach to measuring operational risk, 2007

Consultancy services which our company provided for Tatra Bank were related to the assessment of the entire process of measuring the operational risk categories related to the planned implementation of the AMA approach. ARM assessed the data classification method according to the operational risk events and organizational structure of the bank. Further, requirements for external and group data were discussed, as well as data obtained by an analysis of commercial environment factors, internal audit and stress scenarios. Our company also recommended a method of combining this data with internal data. 

 

Česká spořitelna, a.s. (Erste Group), Validation of AMA approach, 2007

ARM validated the internal model of Česká spořitelna, a.s., through which Česká spořitelna, a.s. calculates the capital requirement for operational risk via the AMA approach. During the project, ARM focused on the quality and integrity of data, calculation procedures, technical realization of the calculation but also on quality criteria of the model.

Selected projects in the area of market risk

Česká spořitelna, a.s. Assessment of valuation model of investment wines, 2019

ARM assessed the valuation model used for the portfolio of investment wines.

The main objectives of the assessment were:

  • verification of the substance and logical correctness of the model,
  • assessing the suitability of the mathematical and statistical procedures used; and
  • assessing the impact of assumptions on model outputs.

Based on this assessment, ARM proposed regular monitoring procedures and controls to ensure better quality of input data and to continuously verify the suitability of the model for possible changes in the portfolio structure. During the cooperation, ARM also designed its own model for valuing the portfolio of investment wines, which is less sensitive to the structure of the portfolio than the assessed model.
“I would like to thank ARM for the cooperation. The performed analysis meets all our requirements, and it also includes additional recommendations for model operation and designing an alternative model.” Custody and Depository Team Manager, Corporate Banking, Česká spořitelna, a.s.

 

Erste Asset Management GmbH, Proposal of approach for measurement of currency risk, 2016

Subject of the cooperation between ARM and Erste Asset Management was proposal of approach for measurement of currency risk of investment fund. ARM proposed several possible approaches to the issue corresponding to client needs. Further ARM elaborates each approach including a summary of their advantages and disadvantages and a practical example. The methodology included also proposal of assessment of the volume of investment fund’s currency risk.

 

ČEZ a.s., Revision and update of model EBITDA@Risk, 2015

ARM provided methodological support to ČEZ company in the area of regular revision and update of model EBITDA@Risk, which is used for calculation of impact size of changes of commodities market prices on the economic result of the ČEZ company. The methodological support was mainly provided in following areas: 

  • revision of methods of modelling of individual market factors, reflecting their mutual relations (e.g. currency rates, electricity prices, prices of emission allowances etc.), 
  • suggesting changes of the models predicting electricity spot prices and forward prices of selected commodities, 
  • programming algorithms for adjustment of time series modelling in the model, 
  • minor adjustments in control interface of the model, 
  • statistical and graphical presentations of model’s outputs, 
  • testing new functionalities.

Additional area of cooperation was providing consultation to the calculation of Value at Risk for credit risk of retail and corporate exposures.  

 

ČEZ, a.s., Revision of model EBITDA@Risk, 2013

ARM provided the company ČEZ with methodological support in the area of revision and updating of the model EBITDA@Risk, which is used for calculating the size of the impact of changes in market prices of commodities on the economic results of the ČEZ. The methodological support was mainly in the areas of:

  • The revision of existing relations between the individual modelled market factors (e.g. exchange rates, prices of emission allowances, etc.),
  • The proposal of implementation and verification of dependencies of new time series – these were the basis for improvement of the model for predicting forward prices of electricity,
  • The creation and programming of algorithms for implementing the newly modelled time series into the model,
  • Statistical and graphical presentations of model outputs,
  • Testing of new functionalities.

 

Moravia IT, a.s., Currency risk management, 2008

ARM was a consultant to Moravia IT, a.s. in the area of currency risk management. The purpose of the project was to identify forms of currency risk and to evaluate its significance and suggest procedures for monitoring, assessment and hedging against currency risk.

 

Česká spořitelna, a.s. (Erste Group), Validation of VaR model, 2003

Experts from ARM validated the Internal model for the calculation of capital requirement for market risk of Česká spořitelna, a.s. An integral part of the project was the analysis of the valuation of transactions on financial and capital markets. The result of the cooperation served, among other things, as one of the grounds for the decision of Česká národní banka (Czech National Bank) to approve the used of Internal model for the calculation of capital requirement for market risk.

 

PSJ holding, a.s., System for the currency risk management of the company and of selected projects, 2002

Within the scope of the consultancy project, ARM´s experts formulated the process or currency risk management into an internal regulation. The regulation describes the method of calculation of currency risk, draft of organizational solution of the currency risk management, schedule of activities of individual departments and preference of methods of hedging against currency risk.

Selected projects in the area of liquidity risk 

Živnostenská banka, a.s., Liquidity management system, 2004

The subject of the cooperation was the analysis of time series and development of a model for the behavior of balances on current accounts and short-term deposits. The output of the analysis is used by Živnostenská banka, a.s. on a daily basis as one of its liquidity management instruments.

 

OKULA Nýrsko, a.s., Liquidity risk management system and financial planning, 2002

The subject of consultancy project at OKULA Nýrsko, a.s. was to assess and improve the current liquidity management system and financial planning process.

Selected projects in the area of risk management

Čepro, a.s .: Development of risk management system (EWS, compliance risks, BCM), 2018-2020

ARM cooperated with ČEPRO, a.s. in the development of a risk management system in the following areas:
  • preparation of the EWS (Early Warning System) concept, including its connection to the risk catalogue for better ex-ante monitoring of significant risks,
  • assistance in the extension of risk assessment in terms of compliance and the extension of the risk catalogue by this assessment,
  • assistance in improving the Business Continuity Management (BCM) process in the following areas:
    • integration of the BCM process into the risk management system,
    • standardization of the procedure for Business Impact Analysis (BIA) in order to identify key processes and create a tool for recording the results of BIA,
    • proposal of a unified structure of Business Continuity Plans (BCP),
    • interconnection of BCM sub-areas with management of extraordinary events, emergency planning and other processes.

"In cooperation with ARM, we are systematically improving the risk management system, both in the area of risk measurement and management. Mutual discussions on individual areas of risk management and ARM's experience help us achieve our plans." Ing. Zdeněk Stejskal, Head of the HSE Department
 

ČEPS, a.s., Update and strengthen risk management system, 2018

ČEPS, a.s. (ČEPS) has been working with ARM to update and strengthen its risk management system.
ARM, in cooperation with CEPS, proposed the main elements of the risk management system:

  • Risk classification,
  • Risk management organisation,
  • Roles and responsibilities of individual management levels and departments,
  • Methodologies for measuring and assessing risks,
  • Reporting.

"ARM's lead consultant, Mr. Radek Křička, presented the main elements of the CEPS's risk management system efficiently and also prepared a draft internal methodology. Outputs processed by ARM have fully met our expectations. Discussions regarding the various elements of the risk management system and detailed solutions to specific procedural steps were very inspiring and helpful in terms of further developments of the risk management system." Head of Internal Audit

 

J & T BANKA, a.s., Consultations on the management of interest rate risk arising from the banking book (IRRBB), 2018

ARM has provided a series of consultations on the methodology development regarding interest rate risk arising from the banking book (hereafter “IRRBB”) to J&T Bank. Within these consultations, ARM assessed drafts of the updated internal methodology on IRRBB from the perspective of completeness and appropriateness of applied approaches, and their compliance with the respective regulation. ARM assessed the compliance of the internal methodology with the current regulation, and also its compliance with the draft regulation stipulated especially in the EBA document EBA/CP/2017/19 and in the proposed amendments to CRD and CRR. ARM’s findings and related suggestions on how to adjust the draft methodology were discussed in several workshops together with additional questions raised by J&T Bank.
The Consultations provided by Advanced Risk Management, s.r.o., helped us to further develop methodologies on the management of interest rate risk arising from the banking book. The consultations were in particular beneficial in terms of suggestions regarding some challenging issues” Director of risk management.  

 

Stavební spořitelna České spořitelny, a. s., Assessment of risk appetite, 2017

The scope of the cooperation between ARM and Stavební Spořitelna České Spořitelny, a.s., (hereinafter „SSČS“) has been engaged in the assessment of risk appetite and related documents. ARM reviewed internal methodologies with respect to SSČS’s business activities as well as with respect to related regulatory requirements. A dedicated workshop has been organised to discuss both quantitative and qualitative internal limits established by SSČS within its risk appetite framework. The output of the cooperation was personal presentation of individual recommendations.
We have been satisfied with cooperation and the outputs was of expected high quality.“ Director of Risk Management

 

Sberbank CZ, a.s., Assessment of the methodology for management of interest rate risk in the banking book (IRRBB), 2017

ARM has conducted an assessment of the methodology for management of interest rate risk in the banking book (hereinafter “IRRBB”). The output of the cooperation was the Report which contained the results of the gap analysis assessing the completeness, comprehensiveness and correctness of the applied methods and procedures including compliance with regulatory requirements, in particular with the EBA Guidelines on IRRBB (EBA/GL/2015/08). For each identified gap, ARM suggested remedial measures. The Report also included an assessment of the compliance with requirements stipulated in the draft EBA Guidelines EBA/CP/2017/19 and responses to additional questions.
We were very satisfied with the cooperation with ARM. The gap analysis and subsequent workshops were beneficial to us as they helped us to identify areas to strengthen management of IRRBB.” Head of Market & Operational Risk.

 

Moravský peněžní ústav - spořitelní družstvo, Assessment of the implementation of ČNB's corrective measures for ICAAP, 2017

ARM cooperated with Moravský Peněžní Ústav (hereinafter "MPU") on the assessment of the implementation of the CNB's corrective measures for the Internal Capital Adequacy Assessment Process (hereinafter "ICAAP"). ARM assessed the ICAAP methodology from the perspective of implementation of specific measures, as well as in a wider context related to the particular measures.

The output of the cooperation was the Final Report in Czech language, which contained ARM’s findings and recommendations related to the verified areas.  

 

Česká spořitelna, a.s., Verification of models used for measurement of Interest Rate Risk of Banking Book, 2017

ARM cooperates with internal audit of ČS on verification of models used for measurement of Interest Rate Risk of Banking Book (“IRRBB”). The subject of the order was audit of below stated models for measurement IRRBB and replication of calculation realized within them on agreed audit sample of data. The integral part of this audit was verification of correctness, completeness and consistency of ČS methodology for IRRBB. Furthermore, we verified its compliancy with regulatory requirements and group methodology as well. ARM focused mainly on these models:
  • Net Interest Income
  • Value at Risk
  • Market Value of Equity
  • Economic Value of Equity
  • Earnings as Risk.
The Final report was delivered in both Czech and English language. It contained findings and recommendation regarding verified areas.

 

ČEPRO, a.s., Design of Risk Management System, 2016

ARM in cooperation with ČEPRO, a.s. designed a structure of risk management system, in particular:
  • designed individual processes in the risk management system and a target organizational structure,
  • designed and consulted with representatives of ČEPRO, a.s., a methodology for identification, evaluation and management of individual risks,
  • designed and consulted with representatives of ČEPRO, a.s., scales for evaluation of impact and frequencies of occurred risks,
  • designed a template for risk recording and subsequently created this template in MS Excel,
  • consulted partial outputs from individual workshops (conducted by ČEPRO, a.s. according to the final methodology),
  • in close cooperation with ČEPRO, a.s., ARM created a risk catalogue (map) based on the outputs from the workshops,
  • created a proposal of internal reporting.
"Under the guidance of ARM, we reached the setting of risk management system that was introduced to employees at various management levels. All outputs tailored for us meet our requirements. In addition, the discussion with ARM provided relevant incentives for further development of the system. The work done by ARM met our expectations."  Jan Duspěva, General manager

 

Air Bank a.s., Roadmap of implementation of audit remedy actions, 2015

The scope of cooperation between ARM and Air Bank providing of project management and expert opinion in the following areas included:

  1. setting priorities in resolving audit remedies,
  2. estimation of labour intensity and implementation of individual findings,
  3. estimation of the available capacity of the departments concerned.
The outcome of the contract was the Roadmap which included the gradual solution of the individual audit remedies taking into account the estimated labour input on solutions and available capacities of the particular departments that were involved in that solution.

 

The University of West Bohemia, Revision of risk management system, 2015

ARM provided The University of West Bohemia in Pilsen with consulting services in the area of revision of currently used risk management system. The cooperation was realized as a workshop where ARM transferred its know-how in the area of appropriate setting of risk management system and suggesting possible steps of its adjustment and further development. During the workshop, especially following areas were discussed:
  • organizational structure of risk management system,
  • definition of individual roles in risk management system,
  • methods of risk identification and risk measurement,
  • regular reporting (structure, quality, frequency, informational flows),
  • monitoring method for implementing suggested risk management measures,
  • ability of the system to flexibly react to changes.
After the workshop, ARM prepared a brief summary of approved conclusions for the management of The University of West Bohemia in Pilsen.

 

Raiffeisenbank, a.s., Development of the Internal Capital Adequacy Assessment Proces, 2014

The goal of cooperation between ARM and RBCZ was the following:
  1. Perform a revi