An Oliver Wyman solution powered by RapidRatings to evaluate credit risk and make lending decisions
CommForecaster is a new Oliver Wyman solution powered by RapidRatings. Using this powerful CECL (Current Expected Credit Losses) and challenger model tool, lenders can stress test scenarios—to better manage bank reserves and understand current and future commercial and industrial (C&I) business loan exposures.
Our solution helps you to make more informed decisions on loan pricing origination and monitoring. It allows financial institutions to easily determine the creditworthiness of obligors, predict portfolio losses, and meet regulatory and accounting requirements.
Our solution enables financial institutions to better manage bank reserves and better understand CECL requirements and scenario analysis
Analyze overall financial exposure
Oliver Wyman CommForecaster evaluates counterparty risk (profits and losses), providing lenders with a clear, predictive view into the financial health of businesses. Lenders can view the information by individual company and/or in aggregate, and can use the information for reporting estimated loss to regulators and auditors.
A flexible, powerful tool for lenders
Oliver Wyman CommForecaster provides lenders with term probabilities of default (term PDs) for the next 13 quarters and beyond to meet CECL requirements—all within a seamless, user-friendly, and secure platform. Lenders can adjust variable inputs on a range of macrosensitive calculations that yield point-in-time term probabilities of default (term PDs) down to the loan or obligor level.
The advantage for your financial institution
Our solution offers proven, independent, fundamentals-based, and predictive PD analytics on a wide range of commercial and industrial (C&I) obligors and macroeconomic scenarios, at broad scale and frequency. It provides comprehensive macroeconomic selections layered with Oliver Wyman’s modeling, including exposure at default (EAD) and loss given default (LGD) modeling. Oliver Wyman CommForecaster can serve as an authoritative challenger model to a lender's own incumbent model inventory. In addition, the solution can be easily implemented and adjusted to the user’s own workflow.
Oliver Wyman CommForecaster solves your biggest challenges
With the duration and impact of Covid-19, accounting standards such as CECL (Current Expected Credit Losses) and other regulatory stress tests such as CCAR (Comprehensive Capital Analysis and Review) and DFAST (Dodd-Frank Act Stress Tests) remain necessary practices for financial institutions. Below we show how Oliver Wyman CommForecaster helps modeling, planning and regulatory reporting needs—in either challenger or champion roles.
Challenge
Banks have adopted CECL standards, but the necessary model inventory may be sizeable or sparse. The model inventory may have been derived from longstanding CCAR/DFAST modeling or developed separately, as well as quantitative or qualitative—or a mix of the two..
Solution
Oliver Wyman CommForecaster helps model/validation managers determine the accuracy of incumbent C&I modeling. Our solution provides a broader perspective for analysis by adding and including selected macroeconomic scenarios to an institution's internally-generated scenarios.
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Challenge
Under CECL’s “life-of-loan” directions, accounting executives face credit modeling and reporting challenges and the need to estimate losses over longer loan time horizons.
Solution
Accounting executives can use our solution to validate allowance calculations, reassure accuracy, and show consistent macroeconomic forecasts and reporting for external auditing requirements.
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Challenge
The pandemic created scenarios that have never been seen before. Banks’ model inventories were unlikely to have performed entirely according to expectation during the breathtaking discontinuities observed in the economy during 2020.
Solution
Compliance executives can use our solution to demonstrate CECL compliance, as well as the sufficiency of their modeling. For example incumbent modeling—as compared to Oliver Wyman’s independent challenger modeling.
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Challenge
Underwriters face increasing disruption from fintech and non-bank lenders, as well as CECL requirements and the need to understand current and future commercial and industrial (C&I) loan exposures.
Solution
Underwriters and loan-surveillance teams can use our solution to validate optimal C&I selection and loan pricing, while demonstrating vigilance towards current outstanding obligors and prospectively enlarging the list of future obligors.
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Challenge
In the wake of Covid-19, comprehensive CECL reporting examines a far wider range (than prior to Covid-19) of possible macroeconomic and credit-loss outcomes. Severely adverse outcomes that were once thought to be shear speculation must now be weighed regularly.
Solution
Board members can use our solution to provide investors, regulators and external auditors with validated representations of the allowance for credit losses, as well as to meet the quarterly reporting requirements for publicly-held bank holding companies.
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Challenge
Auditors may require that institutions have additional controls over accounting policies, operational procedures, information systems and data used for credit modeling.
Solution
Institutions can use our solution to meet both internal and external audit requirements.
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Challenge
In the aftermath of COVID-19, many smaller banks are working to meet CECL requirements. Credible stress-testing has become much more critical than prior to the pandemic for survival, as well necessary for communication with major constituents, especially regulators and auditors.
Solution
Our solution gives smaller banks the same access to granular, bottom-up analysis of C&I portfolios in their planning and reporting that larger banks use. .
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Oliver Wyman CommForecaster is based on RapidRatings’ financial health data and analyses. The FHR® authoritatively measures corporate financial and operating efficiency, along with near-term resilience from a data set that includes careful and consistent analyses of more than 12 million+ company-years of financial statements over more than 40 years of operating history. It comprises companies of all sizes and descriptions, public and private, surviving and failing, under a broad range of macroeconomic settings.
Oliver Wyman CommForecaster provides you with:
About RapidRatings®
RapidRatings® sets the standard for financial health transparency between business partners, transforming the way the world’s leading companies manage enterprise and financial risk. RapidRatings provides the most sophisticated analysis of the financial health of public and private companies in over 140 countries worldwide. The company’s predictive analytics provide insights into how suppliers, vendors, and other third parties are likely to perform. For more information, visit rapidratings.com.