An opportunity

called Basel II

When the Basel Committee for

operational risk within the

Banks across the globe, including

Banking Supervision (BCBS)

framework as well.

those in countries where regulators

embarked on its consultative process

for revising the Basel Accord of
1988, a new revolution beganone

This framework offers banks the

flexibility and freedom to use internal
risk models for calculating capital

that has driven risk management

requirements for credit and

across the global banking system to a

operational risks.

were slow to begin work on Basel II

compliance, are now showing
significant progress.
Basel II envisions an evolutionary
path for banks in terms of risk

new level of sophistication and

maturity.

This move towards aligning

management maturity, and the

regulatory capital to economic capital

proposals impact all areas policies,

Basel II, the Revised Framework for

International Convergence of Capital
Measurement and Capital Standards,
refined over three successive
consultations and finalized in June

Indeed, if the effort does nothing but improve risk

management at banks and improve the risk focus of
supervisors, it will be worth the time and resources we
have all expended.

2004, aims at a high degree of risk

Mr. L.H. Meyer
Member of the Board of Governors of the US Federal Reserve System,
at the Bank Administration Institutes Conference
on Risk Management, New York, 15th October 2001

sensitivity in the regulatory capital

framework. The focus is on lowering
regulatory capital requirements for
banks with lower risk, which in turn
would encourage and reward superior

has encouraged banks around the

world to review their risk

processes, structure, data and

systems. The three mutually

risk management procedures. While

management systems and practices,

the 1988 Accord, amended in 1996,

and to adopt best practices embedded

was about market and credit risk,

in Basel II thereby helping sharpen

with the proposed methodology for

Basel II attempts to integrate

their competitive edge.

capital computation, balance

reinforcing pillars of Basel II, along

flexibility with market discipline and

i-flex consulting offers an

approach that is based on a deep

supervisory reviews.

end-to-end partnership. It assists

understanding of ground realities.

banks in meeting each of these

This blend guides i-flexs approach to

challenges from initial gap

consulting services.

Broadly, banks are now faced with

the following challenges while
assessment to complete program
implementing Basel II:
management.
Achieving the desired level of
maturity in terms of risk
management functions, policies
and processes.

i-flex consulting Value

Proposition:

i-flex
consulting

Implementing the data

Its People
i-flexs pool of experienced and
internationally certified consultants,

management infrastructure and

i-flex consulting is the business,

analytic applications to support

technology and process consulting unit

all three pillars.

of i-flex solutions. It has an

specializing in finance and risk

established Risk Management

Designing, implementing and
Consulting practice.
validating the required
quantitative frameworks and

i-flex consulting assists banks in all

models.

areas of enterprise risk management:

management, have:
Managed market, credit and
operational risks at banks; and
Assisted large banks as risk
management consultants, and

market, credit and operational risks.

leveraged their rich practical

Integrating the Basel II program

into Enterprise Risk

i-flex blends modern theoretical

experience to address the specific

Management.

frameworks with a practitioners

requirements of clients.

Its Knowledge

Data-sufficiency studies, stress

Assisting banks in the design and

testing and back testing of models.

implementation of internal credit

i-flex consulting has created a

knowledge-base of methodologies,

rating systems.

Assistance in self-assessments of
operational risk.

best practices, templates and

processes. This forms the backbone
for its consulting services.

Managing the Basel II

Program.

Organization-wide reviews of
business process flows from a risk

i-flexs Approach to Basel II

management perspective.
Key Offerings Risk Management

A Methodology of Seven Steps

Assistance in portfolio risk

Formulation of risk management

analysis, risk pricing, risk

Given the complexity of Basel II and

policies.

budgeting, and implementing

the enterprise-wide nature of its
economic capital frameworks.

Review of the organizational risk

impact, implementing its proposals is

management process; design of the

organizational structure for risk
management; definition of roles,
responsibilities and processes.
Benchmarking of current policies,

by no means simple, calling for a well-

Offerings
Basel II

planned, well- structured and

centrally-coordinated effort.
i-flex consulting recommends a

Reviewing Basel II readiness and

seven-step approach, which will

processes and IT infrastructure

preparing Basel II implementation

with best practices and regulatory

roadmaps.

standards.

plan and successfully implement

their Basel II compliance

Architecting overall solution

Assistance with evaluating,

selecting and implementing risk
management systems, including

help banks

framework for Basel II

programs. Indeed, it is i-flexs

compliance.

belief that this approach will open

more creative paths to robust risk

Designing and implementing risk

systems for Credit Risk, Treasury

data warehouses encompassing

Mid-Office, ALM, FTP, etc.

Basel II requirements.

management, beyond the limited

horizon of Basel II compliance.

Approach to Basel II Compliance - Seven Steps

Organization,
Policies & Processes
Redesign

Data Management
& IT Applications

Implementation
Roadmap

Gap Analysis

Basel II Program
Initiation

Supervisory
Certification,
Parallel Run
& Go Live

Phase I:
Gap Analysis

Phase II:
Implementation Roadmap

Analytics - Models,
Methodologies
& Validation

Phase III:
Implementation

Phase IV:
Compliance & Certification

i-flex offers to assist banks at each

effective program management for its

consulting offerings encompass

of these seven steps. Starting with an

clients, i-flex consulting proposes an

the entire gamut of policies,

initial high-level gap analysis

end-to-end partnership.

structures, processes, data and

using i-flexs proprietary Basel II

analytics thereby aiming at

Readiness Self-assessment Tool to

While i-flex considers IT initiatives

state-of-the-art risk management

developing a complete

to be at the core of Basel II

rather than mere regulatory

implementation roadmap and

implementation in banks, the

compliance.

i-flex solutions limited, i-flex Park, C/o Embassy Business Park, C.V Raman Nagar, Bangalore-560093, India

Contact our marketing offices

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Come Visit us at www.iflexconsulting.com/expertise/basel_II.asp e-mail: basel.consulting@iflexsolutions.com

October, 2004

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