ERisk Analytics 1.0 - A Proven Enterprise Risk Management Framework

ERisk Analytics 1.0 incorporates a wide range of enterprise-risk management functionality into one seamlessly-integrated product. Based on world-class analytics licensed from Oliver, Wyman & Company - the leading management consulting firm specializing in financial services - the product delivers a robust Economic Capital and Risk-Adjusted Return on Capital (RAROC) framework for linking risk to required capital. It is the only software solution available today that effectively integrates risk assessment and management across the full spectrum of risks, including credit, market and operational risks. With ERisk Analytics 1.0, banks can fully measure their aggregate risk exposures, identify concentrations and diversification options, and increase shareholder value by managing risks more aggressively and effectively.

According to Murray Nash, Vice President of ASP Services, "ERisk Analytics 1.0 is revolutionizing the way banks manage their capital by providing CEOs, CFOs, and CROs with a new generation of strategic decision-making tools that complement and enhance current risk measurement and reporting systems. Our solution leverages secure Internet delivery to make it easy to use and affordable. ERisk Analytics 1.0 is an excellent way for banks to address the demands of regulators, shareholders, and the marketplace to improve the efficiency with which they deploy their capital."

At CoBank, a $24 billion cooperative bank and early adopter of ERisk Analytics 1.0, Paul Kern, Vice President of Risk Management, envisions the ERisk solution "as helping CoBank improve a wide range of areas - from portfolio risk management and identifying credit concentrations, to assessing the profitability of business lines and pricing risk into individual projects and products. CoBankss shift towards a more robust economic capital methodology will help it maintain a leadership role within its banking niche."

ERisk Analytics 1.0 - Key Benefits

Forward-thinking banks that adopt ERisk Analytics 1.0 reap a full range of benefits, including:

• Measure Return on Equity (ROE) Accurately and Consistently - ERisk Analytics 1.0 utilizes an advanced Economic Capital based methodology which has been recognized by the banking industry as providing the most effective means of measuring ROE at any level within an organization - business units, products, customers, or even transactions.
• Manage Capital Levels and Identify Capital That Can Be Released or Re-Deployed - ERisk Analytics 1.0 quantifies where capital is being used, and, after combining it with financial returns, shows where shareholder value is being created or destroyed. Senior management now has a new tool to assess which businesses to grow, shrink, rethink, or exit.
• Price Loans to Earn Attractive Risk-Adjusted Profits  - ERisk Analytics 1.0 provides all the information banks need to properly implement a risk-based pricing framework. A growing number of banks are using aggressive risk-based pricing to "cherry pick" the most profitable loans. Banks not using this technique are sure to accumulate a disproportionate share of under-priced and higher-risk loans.
• Improve Communication With Equity Analysts  - Equity analysts have long embraced RAROC as a way to understand risk-adjusted profitability of banks, and many believe that Economic Capital frameworks signal a sophisticated management team that is focused on value-added returns. Using ERisk Analytics 1.0, banks can begin including more disclosures about Economic Capital and RAROC in their annual reports and briefings with equity analysts.
• Comply With New Regulatory Risk-Based Capital Adequacy Modeling Requirements Without Adding Additional Staff - Recent and proposed regulatory guidance, such as Basle 2001 and regulations such as SR 99-18 and OCC 2001-6, points to emerging momentum for banks to adopt risk-based capital modeling. Because ERisk is on the cutting-edge of regulatory reform, our models are designed to address the key drivers behind these new regulations. ERisk Analytics 1.0 provides key features that deliver the comprehensive risk measurement and linkage of risk to capital that these regulations will mandate.
• Make More Informed M&A Decisions - ERisk Analytics 1.0 is a powerful new tool for the evaluation of merger and acquisition opportunities. During due-diligence, M&A decision-makers can use ERisk Analytics 1.0 to perform "what-if" analyses to evaluate the effects of various merger targets in terms of RAROC and shareholder value.
• Perform Cost/Benefit Analysis for Risk Transfer Activities - For those banks engaged in risk transfer transactions, ERisk Analytics 1.0 provides a powerful means of measuring the benefits derived from risk reduction. Banks can easily calculate the ratio of the transaction cost to the capital relief of the transaction in terms of economic capital to fully understand the RAROC ceded to the other counterparty.

ERisk Analytics 1.0 also overcomes a common obstacle that banks face in implementing comprehensive risk assessment and reporting solutions - a weighty commitment of time and people resources. ERisk Analytics 1.0 is the only capital management solution that banks can have up-and-running in less than twelve weeks and requires only one or two full-time client resources during installation. ERisk offers a comprehensive "Quick Start" implementation program that includes a dedicated team of on-site ERisk experts to assist in data preparation, system integration, and training.

About ERisk

ERisk is a full-service provider of strategic risk management solutions, including internet-delivered analytics, consulting, risk transfer advisory and the ERisk.com portal. ERisk helps financial services organizations, property & casualty insurers, energy companies and non-financial corporations transform risk management processes to increase management effectiveness, reduce losses and increase shareholder value. For more information about ERisk, please click here.

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