Business Case Definition for Collateral Management
Before initiating a large scale programme of change around collateral management, it is often important for our clients to clearly set out the business case for the initiative. This may be where a bank is at the very initial stages of looking to set up a collateral process and team, or it may be where a bank is looking to invest in a large scale transformation programme across its existing collateral management infrastructure. In any such scenario, gaining management buy-in or approval to the level of investment required to reach the target end state is often critical to success.
We have defined a structured methodology to collateral management business case definition. This involves a transparent assessment of the costs involved in undertaking the initiative and the identification of the benefits to be gained. These can then be used as a means of validating the long term investment required for the programme of work.
Our collateral management business case definition methodology incorporates assessment of the following areas:
- What are the risk management benefits to be gained? e.g. exposure reduction
- What are the regulatory and capital benefits to be gained? e.g. capital reduction, alignment with regulatory requirements such as Dodd-Frank, Basel III etc
- What are cost efficiencies to be gained? e.g. through automation of the end to end collateral management process
- What are the control benefits to be gained? e.g. reduction in disputes
- Will the initiative bring benefits to clients? Will this lead to increased revenue for the organisation? e.g. through better client reporting, cross product margining, collateral transformation etc
- Are there direct P&L benefits to be gained? e.g. through collateral optimisation
- What are the estimated project costs across both business and technology teams?
- What is the estimated ongoing Total Cost of Ownership for any technology solutions involved?
A key aspect of our approach to this is utilisation of our Collateral Management Benefit Assessor tool.
For more details on our wider approach to business case definition, see our overall business case definition page.