Process Design and Documentation for a NBFC
This assignment involved design and documentation... Read
This assignment involved design and documentation of processes for all lending activities for a newly set-up Non-Banking Financial Company (NBFC) in the Country. The NBFC was planning to offer all the traditional business lines of NBFCs, namely, equipment leasing, hire purchase of vehicles & consumer durables and home loans. Apart from these lines of business, the NBFC also planned to foray into SME finance. Depending on the then prevailing regulations, the NBFC planned to set up separate divisions or entities for these different business lines.
The Company was in the process of setting up the operations and had engaged the services of a reputed consulting organisation to advise the management. The consulting organisation in turn enlisted our services for the design and documentation of the processes for all the lines of business. Once we designed the processes and the knowledge transfer to the consulting organisation and the NBFC was completed, the former would take up the implementation of the processes. The understanding was that we may be called in during implementation in case any troubleshooting and refinement of the processes was required.
The scope of work involved definition of the processes in detail from client acquisition (both direct clients and through channel partners) through evaluation of credit-worthiness of the prospective client (this was before the introduction of CIBIL), sanction of the loan, disbursement of the loan, till closure of the loan in all respects. The scope also involved design of related processes for acquisition and appointment of channel partners, servicing of channel partners, pre-closure of loans, transfer of loans to other lending institutions and other related processes.
The processes had to be robust and provide for adequate internal controls.
The design of the process involved a three stage process. In the first stage, the draft design was prepared by us and submitted to our principals i.e. the consulting organisation engaged by the NBFC. The second stage involved validation of the design by Subject Matter Experts in the Consulting Organisation. In the final stage, a cross-functional committee in the NBFC examined the design for its functionality and feasibility from the point of the view of the end-users in the organisation.
We formed a three member team to design the processes. Each team member had extensive experience in the working of NBFCs and/or banks. The total time that the team took from start to handing over of the documentation was three months, well within the target duration of four months set initially.
The processes were implemented successfully by the consulting organisation that engaged our services. Hide
Preparation of a Compliance Process Manual
This assignment involved preparation of a comprehensive... Read
This assignment involved preparation of a comprehensive compliance process manual for all labour laws for a newly setup power generation company. The Company was being set up to produce power from alternate sources, particularly, using wind mills. It was a part of a larger group of companies that had interests in steel manufacture and allied industries.
The management of the Company wanted to ensure that no laws were violated and desired to have a comprehensive compliance process manual and a checklist to effectively monitor compliance with the various laws applicable to the Company. Though the larger group had elaborate compliance manual for labour laws, the management of the Company was of the view that any laws unique to the power generation industry should not be missed out. The management decided to engage external consultants to study the laws unique to the power generation industry and suggest an appropriate compliance manual for the Company.
We were engaged by the management with the mandate to develop a comprehensive compliance manual detailing all documents to be maintained, processes to be followed, reports to be submitted and fees to be paid with timelines and responsibility matrix. The duration for the assignment was one month.
We deployed two resource persons from our team in this assignment. One of them was an expert in industrial labour laws and the other was an expert in labour laws in general. They completed the manual and conducted a workshop for the concerned executives in the Company to familiarise the latter with the various labour laws applicable to their Company. Hide
Financial Risk Management in EPC Contracts
This assignment was unique in the sense that... Read
This assignment was unique in the sense that this was structured as a workshop over two days with active participation by the attendees at the workshop. The assignment involved identifying financial risks involved in Engineering, Procurement and Construction (EPC) contracts. The second part of the assignment was to suggest risk mitigation measures to manage the financial risks identified. The client was a major EPC company specialising in EPC projects for the steel industry.
This assignment was executed by a single member who was well versed with financial and other risks in contracts.
At the pre-workshop stage, our consultant interacted with the client’s representatives to understand the nature of operations and contracts that the client entered into. He studied a few past contracts to understand the scope of the projects and the terms and conditions. He also studied a few instances of unique kind of financial risks that had been faced by the client in the past.
Based on this information, the flow of the workshop was structured in consultation with the client. During the workshop, with our consultant as the facilitator, brainstorming sessions were conducted to identify the various potential financial risks involved in the contracts. Then, the workshop moved on to suggesting risk mitigation measures for the risks identified.
Towards the end of the workshop, a risk management manual was prepared to guide the client organisation in all future contracts. Hide
Operational Risk Management
This assignment involved designing a comprehensive... Read
This assignment involved designing a comprehensive operational risk management model for a small mutual fund.
Mutual Funds trade in securities on a regular basis. Settlement for securities bought and sold have to take place on a timely basis without fail. Risk of default on settlement could prove very costly for the mutual funds.
Cash inflows and outflows on account of investment and redemption in/from the funds take place on a day-to-day basis. Idle funds due to non-deployment of collections or failure to payout redemptions on time will lead to financial losses for the mutual funds.
Other operational risks relate to risks emanating from wrong operations by personnel involved in processing various transactions.
The challenges in implementing an effective risk management model were as follows :
a. Challenges posed by highly automated systems with no scope and/or permission as per internal policies for manual interventions or work-arounds.
b. Challenges posed by logistics of personnel commuting from different locations across the city in case of disruptions in transport and communication due to natural phenomena such as cyclones.
c. Challenges posed in case of failure in communication and connectivity infrastructure with external service providers such as Registrars, Custodians, Bankers and other intermediaries in the capital markets being spread across different cities in the country.
d. Challenges posed by ensuring that the risk management practices of external service providers were aligned to the mutual fund’s risk management policies.
Our team comprising of three members, one of whom was well versed in mutual fund processes, and the other two being an IT expert and banker respectively, interacted extensively with the operating personnel in the mutual fund. They interacted with the investment team, the investor relations team, the finance team and other relevant personnel. They understood the criticality of the various operations and the consequences of not executing the various activities on time.
Based on these interactions and an independent study of the operations, our team came up with a comprehensive risk management model to manage the operational risks likely to be faced by the mutual fund. Hide
Predicting Credit Card Chargebacks
This is a conceptual model that we have... Read
This is a conceptual model that we have worked on to predict chargebacks in credit card transactions with a view to prevent such chargebacks.
Basically, the objective was to come up with a predictive model that can be used by retailers and ecommerce platforms to predict possibility of chargebacks in purchases with credit cards.
Chargebacks in credit card transactions is one of the major problems faced by merchants.
The model that we came up with involved the following aspects :
a. Profiling of the entity using the credit card for a purchase transaction
b. Profiling of the transaction
To profile both the credit card users and the credit card transactions, we used a sample database of credit card transactions. Using machine learning algorithms and rule based checks, we understood the profile of card users who are likely to apply for a chargeback and transactions that had potential for chargeback based on past patterns as evidenced by the sample database.
Combining the above two aspects of the credit card users and transactions, we were able to come up with a model to predict possibility of chargeback in credit card transactions. Hide
Demand Forecasting Model
This assignment involved coming up with a model for... Read
This assignment involved coming up with a model for forecasting volume of sales on any given day to enable a retailer to optimise his inventory levels in the showroom.
The retailer had around 50 showrooms across the country and dealt in consumer electronics products. The retail organisation was interested in predicting the demand for a particular high-end electronic item (let’s refer to it as ‘the product’) across the chain of showrooms so as to optimise the inventory levels in various godowns. The retailer had sales data right from the introduction of the product in the market three years back.
Alongwith a few select senior managers of the showrooms, we identified various factors that would influence sales of the product on any given day. Having identified these factors, we developed a regression model based on the three years of sales data available with the retailer. Various statistical tools were used to ensure that the three year data could be used for the regression analysis.
Based on the regression analysis, we were able to identify a specific number of factors that would have the maximum influence on demand for the product on any given day. Based on this, we were able to suggest a model that would help the retailer to forecast the demand for the product on any given day. Hide