New Version Includes Advanced IFRS9, CECL, Expanded Stress Test Capabilities, Revamped User Interface
NEW YORK, March 23, 2018 /PRNewswire/ -- Kamakura Corporation announced on Wednesday a major update to its enterprise risk management system, Kamakura Risk Manager (KRM). Version 10.0.3 has now been shipped to clients in 47 countries. Kamakura Risk Manager allows users to analyze credit risk, market risk, interest rate risk, liquidity risk, counterparty risk, and economic and regulatory capital adequacy on a fully integrated basis. Version 10 expands capabilities and enhances processing efficiency while providing boards of directors, shareholders, and regulators an accurate and comprehensive view of the total financial risk of the organization, as well as the tools to manage that risk. The new version incorporates reports for the Basel III-mandated liquidity coverage ratio (LCR), net stable funding ratio (NSFR), and interest rate risk in the banking book (IRRBB), as well as providing many other important enhancements.
Martin Zorn, President and COO of Kamakura Corporation, said Wednesday, "We are extremely proud to announce the development of KRM Version 10, which continues Kamakura's thought leadership with respect to risk while adding a host of new capabilities. With Version 10, you can efficiently simulate multi-period, credit-adjusted cash flows, providing superior measurement for integrated risk management, capital allocation, risk hedging, financial reporting, and regulatory compliance. This new version will allow us to provide a longer product life cycle in which new features can be more easily incorporated. We are already developing the next generation of reduced-form models to value bonds and other asset classes that leverage the capabilities of KRM and Kamakura Risk Information Services (KRIS)."
KRM version 10 offers a modernized database structure, which positions the product for many years of expansion with fewer table structure changes. It includes end-to-end scripts to upgrade the database from earlier versions. The upgrade also provides expanded user-defined fields, enhanced import and export capabilities, and expanded capabilities for user-defined formulas. Access control and password management have been strengthened to reflect the importance Kamakura places on cybersecurity. The license file has been restructured to ensure that clients only need to license the modules they need today but have the flexibility to add others as their requirements grow. Users will have more control over concurrent processes and have the ability to allocate calculations from a central location to remote servers to improve throughput and reduce processing time.
The user interface has been completely rewritten to simplify the process for setup, initiating runs, and obtaining critical results. It has been modernized to leverage technological enhancements and client requests. In addition to our redesigned desktop interface, KRM version 10 also offers an online interface that allows for quick access from a web browser and is customizable by the user. An example is shown below:
Enhancements to risk simulation
KRM version 10 includes many improvements in the area of regulatory and accounting compliance, forecasting, transfer pricing accuracy, and flexibility, to name a few. Version 10 simplifies the process of setting up stress tests, giving the user the ability to program multiple predefined scenarios. The new version also expands the definition of a "single risk universe" and provides the flexibility to define risk groups and distributions.
KRM 10 adds additional behavioral model capabilities, including prepayment and redemption functions for instruments with non-determinant maturities, such as deposits and credit cards. Moreover, Kamakura has simplified the way behavioral models are implemented, creating a platform for fast integration. This is critical to delineating core and volatile elements in liquidity reporting and repricing, as well as for forecasting.
Another key area of simplified setup and enhanced functionality is the forecasting module. Definitions for contractual runoff and new business are expanded, and the ability to define new business growth rates and future interest rates is simplified. Setup is quicker, and users have greater control. User-defined functions can include growth formulas for groups of products and for a multitude of dynamic conditions. Automatic rebalancing and general ledger reconciliation are built into the system.
KRM version 10 allows the user to specify any mathematical function to stress market risk, credit risk and liquidity risk factors, including immediate or discrete shocks across user-defined future periods or stochastic random shocks that evolve over time. Portfolio decomposition and risk decomposition by risk group can be analyzed in a single period or across future periods. Users can use dynamic allocation for regulatory measures such as liquidity coverage ratio (LCR).
International Financial Reporting Standard 9 (IFRS 9) was introduced in version 8.1 and is expanded in version 10 to integrate phase migration, in addition to just measuring one-year and lifetime expected losses. Version 10 easily incorporates prospective and retrospective hedge effectiveness and testing. It provides expanded financial disclosure, including fair value measurement and loan impairment. It is fully compliant with the current expected credit loss (CECL) model under U.S. generally accepted accounting principles (GAAP).
Expanded transaction coverage
KRM version 10 allows users to incorporate synthetic yield curves and enhances the smoothing and forward generation of curves in batch mode. The ability to create and incorporate synthetic yield curves in multiple interest rate or multiple currency environments is critical. In the aftermath of the credit crisis, the market has migrated away from the use of LIBOR to using Overnight Index Swaps. This switch requires precise smoothing or extrapolation into a synthetic curve to be consistent with market conventions regarding effective dates. Additional day counts, pricing conventions, and new instrument structures have been incorporated where country-level distinctions apply.
Like prior versions of Kamakura Risk Manager, version 10 is compatible with a wide variety of relational database management systems, including Microsoft SQL Server, Oracle, and virtual and cloud environments. KRM version 10 is fully compatible with KRIS default models for public firms, sectors, and indices, as well as U.S. banks, sovereigns, and non-public firms. This link allows clients with both KRM and KRIS licenses to load KRIS default probabilities, default formulas or functions, and default correlations into KRM for analysis with the click of a mouse. KRIS includes default probabilities for 39,000 public firms in 69 countries. It also includes default probabilities for non-public firms and 181 sovereign nations, as well as a number of other default models currently in development.
About Kamakura Corporation
Founded in 1990, Honolulu-based Kamakura Corporation is a leading provider of risk management information, processing, and software. Kamakura was named to the World Finance 100 by the editor and readers of World Finance magazine in 2017, 2016 and 2012. In 2010, Kamakura was the only vendor to win two Credit Magazine innovation awards. Kamakura Risk Manager, first sold commercially in 1993 and now on version 10, is the first enterprise risk management system for users focused on credit risk, asset and liability management, market risk, stress testing, liquidity risk, counterparty credit risk, and capital allocation from a single software solution. The KRIS public firm default service was launched in 2002. The KRIS sovereign default service, the world's first, was launched in 2008, and the KRIS non-public firm default service was offered beginning in 2011. Kamakura added its U.S. Bank default probability service in 2014.
Kamakura has served more than 330 clients with assets ranging in size from $1.5 billion to $3.0 trillion. Its risk management products are currently used in 47 countries, including the United States, Canada, Germany, the Netherlands, France, Austria, Switzerland, the United Kingdom, Russia, Ukraine, South Africa, Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Singapore, Sri Lanka, Taiwan, Thailand, Vietnam, and many other countries in Asia, Europe and the Middle East.
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SOURCE Kamakura Corporation