The Client’s Profile
Client A is a large bank with many assets. For a long time, it managed its portfolio centrally, but realized that this strategy was ineffective and cost-prohibitive when the market becomes illiquid, such as during the recent financial crisis. Thus, Client A decided to manage risk sensitivity by ensuring that loans entered the portfolio at par value upon origination. Before adopting Brilliance’s DealPoint solution, Client A was using multiple spreadsheets to help price loans, which discouraged pricing consistency across the business. The client required a modernized, future-proof solution that was scalable, easy to use and centralized to fit the bank’s needs.
Challenges facing the client
While a large, disparate presence offers portfolio diversification benefits, the client’s geographic diversity and size added complexity and challenges to achieving consistency, one of the key objectives in the strategic initiative. Client A has relationship managers all over, operates in multiple jurisdictions, and conducts business in different languages. The bank had to transform its models, data and systems to be able to do the following:
- Automate relationship-level forecasts for complex client groups with many products
- Measure risk and return for all products, not just loans
- Produce consistent actual vs. forecasted performance measures
- Deliver powerful analytics with features tailored to different user groups’ needs
- Integrate with existing systems to enable single sign-on via a central intranet system
The Brilliance solution
Client A is very invested in portfolio management and needed a partner with deep expertise in risk-based pricing technology to help the bank realize its strategic initiative. After lengthy research into building versus buying a solution, speaking to other Brilliance clients, and taking workshops with Brilliance, they selected Brilliance Financial Technology because of its flexible solution and ability to accommodate these requirements.
Phase 1: An automated pricing platform for one business unit
Brilliance replaced the client’s various pricing spreadsheets with its DealPoint solution, a centralized, intranet-based technology platform, for all of its credit, non-credit, and ancillary products. Client A implemented two return-on-risk metrics as its key performance measures. The inclusion of all products enabled the bank to perform holistic customer relationship forecasts for its existing and new businesses. DealPoint was also integrated with Client A’s active directory to enable user-access control. The integration allowed users to gain access to different data and functionality based on the user’s location and role. For example, a relationship manager in one gained access to a different set of customers compared to one located in a different time zone. In addition, relationship managers gained access to more simplified input fields compared to portfolio managers.
DealPoint was rolled out to thousands of relationship and portfolio managers within one business unit that had personnel located in geographically disparate areas. For the first time, these users were able to view relationship-level forecasts of their existing business, eliminating the need to manually key in existing business in the pricing process. In addition, the users gained the ability to amend or remove existing business and/or add new business. They could also dynamically recalculate relationship forecasts to assess the impact of their deals.
Phase 2: An automated pricing platform for the bank and approval workflow
Brilliance expanded its existing DealPoint solution to include an additional business unit, adding many more additional users. Brilliance delivered two key additional enhancements to the system:
- An automated deal approval workflow system
- Management information capability
These two features enabled Client A to monitor the deal approval status and risk/return characteristics of its new business on a forward-looking basis as well as at aggregate country, regional and global levels. This new information empowered decision makers with information to adjust the ease or difficulty of pricing approvals. Thus, it encouraged more origination in product, customer and industry segments where risk/return trends were improving, and it discouraged origination in segments with deteriorating risk/return trends.
Phase 3: An automated pricing platform accessible via the tablet and performance tracking
Brilliance expanded DealPoint to include a third business unit, adding thousands more users from Client A. In this phase, Brilliance added three key enhancements. First, Brilliance delivered a mobile-ready version of DealPoint, enabling users to access the features of DealPoint via a tablet or mobile device at or outside the office. Second, Brilliance added an additional performance measure that Client A elected to introduce and track against the previous two measures. Finally, Brilliance added an ancillary revenue-tracking feature to enable the bank to track promises made by originators when proposing new transactions. This feature empowered management to track staff performance against targets and encourage behaviors that increased profitability.
What’s next for our client
Now that a number of Client A’s business units are all using DealPoint, the bank, for the first time, has access to comprehensive data about its lending business across many different regions. The bank plans to keep extending its management information capabilities to establish market benchmarks and continue to drive overall margin increase.
With the increased importance of stress testing, Client A also plans to deliver stressed what-if analyses to the relationship managers to raise awareness of how stressed scenarios impact their overall customer profitability.