Develop a risk heatmap
In times of crisis, every moment counts - that's why focusing on the essentials is all the more important. zeb supports you at short notice in quickly defining a risk heatmap to prioritize and operationalize a tailor-made action plan for your institution.
As the crisis unfolds, the pandemic and corresponding public reaction give rise to a multitude of risks. Confronted with a complex situation involving major uncertainties, crisis managers need to focus on the essentials. Your organization requires clear directional guidance to focus on the most pressing issues.
Rising volumes of NPLs will pose a major challenge—moreover, European banks’ limited absorption capacity for excess loss provisions might prove to be a critical vulnerability, even with regulatory easing on its way.
Market Risk & CCR
As asset prices tumble and market volatility rises, many banks’ trading and treasury portfolios are especially vulnerable, while margin calls and collateral haircuts are expected to rise sharply.
Liquidity & Funding Risk
Credit runs will require fresh funds as repayments of existing loans stall, deposits are withdrawn and credit lines are drawn down, particularly for USD exposures. The looming crisis might reintroduce issues of trust between banks, resulting in an illiquid interbank market.
The single most significant operational issue will likely not be illness of employees themselves (due to the age distribution of severe Covid-19 cases), but rather the challenges associated with virtual collaboration and leadership. Higher data demand might lead to system unavailability, bandwidth issues and/or scarcity of tokens.
Revenue will be hit from multiple angles: forbearance measures, rising funding costs and decreasing transaction volume are only just the start. Loan mispricing through underestimated risks may lead to adverse selection.
High—gaining a high-level understanding of the risk landscape provides guidance on the path forward and helps to allocate resources quickly and efficiently to trouble spots.
Obvious external dependencies are driven by the dynamics of the pandemic and the corresponding measures of public institutions. With respect to both topics, zeb can help keep you informed (see our free-of-charge offers “Epidemic Monitor” and “Public Stakeholder Monitor”).
All departments involved in client business, trading, treasury and risk/financial control are affected—risk assessment is an institution-wide concern.