Business Case Definition for CVA
Before initiating a large scale programme of change around CVA, 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 CVA process, or it may be where a bank is looking to move to a new level of sophistication in the active management of CVA. 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 CVA 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 CVA business case definition methodology incorporates assessment of the following areas:
- What are the risk management drivers and benefits to be gained from setting up a CVA process? e.g exposure reduction
- What are the regulatory and capital benefits to be gained from setting up a CVA process? e.g. capital reduction, alignment with Basel III requirements, compliance with accounting standards
- What are the P&L benefits to be gained from setting up a CVA process? e.g. reduction in P&L volatility
- 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 CVA Benefit Assessor tool, which is a benefit assessment model specifically designed to support the CVA business case justification.
For more details on our wider approach to business case definition, see our overall business case definition page.