Financial modeling plays a critical role in banks and financial institutions. They assist financial institutions in decision-making, risk management, and strategic planning processes. Therefore, banks and financial institutions heavily rely on these models, from measuring credit risk and predicting economic conditions to pricing complex derivatives and ensuring regulatory compliance. Although these financial models are powerful

Credit Portfolio Management (CPM) is a key function for banks and financial institutions. It consists of a critical set of tools, functions, principles, and processes within the institutions to manage the credit risk exposure of loans, bonds, and financial instruments portfolios. A survey by McKinsey and the International Association of Credit Portfolio Managers (IACPM) shows

Model risk occurs due to a potential flaw or performance gap in the internal control model, which financial institutions use to measure quantitative information and make decisions. Aside from an adequate control model, its misuse for ulterior motives may also lead to incorrect and unreliable results, posing the model risk. These models are often designed

Operational risks present extreme complexities to mitigation strategies due to diverse and volatile risk factors that span multiple aspects such as technology, people, policies, and external factors. For instance, the sheer availability of data can give rise to challenges in data processing, privacy, security, etc., leading to the risks of data theft or misuse. The

Credit risks can severely impact a bank’s financial stability and reputation and can appear in many forms such as loan defaults, liquidity issues, adverse market events, moral hazards, etc. Systematic credit risk management can curtail and mitigate these significantly, provided appropriate measures are taken. Among all, following appropriate processes, techniques, and practices is crucial, and

Credit risk is one of the significant risks for banks and financial institutions across the globe, and it can lead to significant financial and reputational losses. Credit risks emerge due to the possibility of defaults on debt obligations, wherein a borrower fails to pay back the dues to the lender. Banks must proactively manage their

Credit risk is a major financial risk that occurs when a borrower or entity fails to repay the owed principal and interest to the bank or financial institution. Payment defaults may occur on credit cards, mortgages, fixed-income securities, etc. It is a significant concern for financial institutions and investors as it can lead to: Financial

Control testing assists banks and financial institutions to evaluate their internal controls, including corporate governance & accounting processes, to mitigate risks, meet regulatory compliance, detect and prevent fraud, and optimize operational efficiency. According to the Committee of Sponsoring Organization of Treadway Commission (COSO), “internal control is a process, effected by an entity’s board of directors,

Internal controls help banks and financial institutions detect mistakes, fraud, and non-compliance, and reduce risks. In addition, control testing plays a vital role in assessing these internal controls and is critical to ensure they are working as intended. With effective control testing, banks can determine the existing and emerging risks, gaps, and weaknesses in the

Banks and other financial institutions face a wide range of enterprise risks that can impact their operations, financial stability, reputation, and customer trust. Implementing and testing internal controls in banks — i.e., policies, procedures, and practices — can help financial institutions mitigate these risks and establish a robust and risk-resilient ecosystem. The following points summarize