Since 1998, FinMetrics has shown to be a key partner when an independent, cutting-edge, sound and robust advisory was requested. We have been working for and together with courts of justice, major law firms, banks, corporate treasuries, consulting firms (among which E&Y, PwC, BDO), and in practitioners’ conferences (such as Structured Products), across Switzerland, UK and the Benelux.
Many of these cases involved providing objective and neutral valuations, opinions on risk governance, identifying problems in hedging operations, defining new policies, setting new standards, analysing requirements, and the roadmap to implement them.
For a number of clients, we do act as regular collaborators in an accompaniment mode. This is frequently the case for matters related to:
- the risk policy definition,
- reporting for regulatory or normative reasons: hedge effectiveness reporting (in the case of treasuries), insurance regulatory reporting, reporting on collateralised lending (private banks), and verification/validation of models and calculations, or
implementing managerial dashboards, thanks to our FinBoard platform, to accompany the development of new risk management processes associated with business functions such as Crédit Lombard (private banking), monitoring and benchmarking of asset allocation mandates, FX hedging practices for fund management, hedge effectiveness testing and reporting,…
FinMetrics was founded by financial engineers, with profiles combining cutting-edge financial and actuarial knowledge with strong computing capabilities. This specificity has given us an undeniable advantage when providing our advices together with the direct capability to turn them into business productivity solutions.
Our advisory services are built around three (3) main axis:
Any risk management mission must start with a thorough review of the identification of risk exposures, the current management practices, and the threats of challenges imposed by the regulatory environment. But the key missing link is often a good comprehension of the activity and related internal and external workflows of the company. At FinMetrics, we are supremely sensitive to propose adequate advices and solutions, consistent with the size, complexity, processes in place, frequency, and goals pursued.
Too many institutions are base their decision-making on the analytics of their own data simply because they are either (1) too complex, or (2) their approach to the problem is too complex (illusion of precision through the requirement of exhaustiveness). In the first case, “to be informed” might not mean much. In the second case, we face ignorance and/or obscurantism.
It is hard in finance not to be confronted with valuation and other related challenges. Among our advisory activities on valuation performed so far in this domain, we can cite:
- family businesses around the World, including valuation expertise for M&As and international arbitrages.
- private stock option plans on illiquid stocks for the authorities,
- the examination and modelling of mandatory convertible securities with complex covenants and complex mortgages,
- the on-demand pricing of a wide and continuously evolving range of structured products,
- biotech projects for investors
- commodity derivatives,
- international cost of capital to be applied to the projects of the subsidiaries in multinational environments,
- hedge effectiveness tests,
- the adequacy of risk management best practices,
- optimal asset allocations for insurance companies,
DESIGN AND IMPLEMENTATION
Through its clientele, among them Group Treasuries, Private Banks, a Brokerage House and Funds of Hedge Funds, FinMetrics is renowned for its capacity to put analytics into perspective, i.e design dashboards where analytics are interpreted into key risk indicators and monitoring variables specific to the various business functions. Sometimes, we provide a prototype that will be implemented into some mainstream system, sometimes we provide a complete solution. In the majority of the cases, we collaborate with the management to integrate into a more structured environment the existing macros, extractions, computations and reports allowing them to take more time for the decision-making and less in the number-crunching.
See some examples here below.
Examples of Designs and Implementations
Thanks to our capacity to materialise our recommendations and our collaboration into management cockpits, today (sample):
- A fund of hedge funds can better follow the convolution of single hedge funds into their own classes, with a constant monitoring of liquidity terms and buffers, FX hedging and historical coherence of NAV statements.
- A brokerage house can assemble counterparty exposures Worldwide into a single dashboard and provide a constant monitoring of credit & market exposures with key risk indicators.
- A private bank can better monitor its collateralised loans (“Crédit Lombard”) and provide advice to its clients depending on the levels of collateralisation reached.
- The group treasury of an international corporation can easily pre-enter FX hedging deals, monitor the opportunity costs of its hedging practices in FX and IR, and produce hedge effectiveness tests and calculations.
- An insurance company can review the optimal allocation under constraints of its investment portfolio.
- A bank can meet weekly in duplex with the members of its investment committee for its nostro portfolio, review and test the weekly guidelines.
- A private bank cross-checks the allocation of its clients against the portfolio models (benchmarks) to identify sources of discrepancies and make sure to manage them.
- The treasury department of a major airline company can monitor the settlements and net payoff profiles of its commodity hedging practices, provide an independent and tractable price for complex commodity derivatives, verify the adequacy of IR hedging by strategy, and produce hedge effectiveness reports.
In a nutshell, we can:
- Produce Excel add-ins, for limited-size projects where prototyping first is key.
- Create specific GUIs (general-user interfaces) on top of a strong database structure, for specific and batched tasks.
- Use our FinBoard platform for a rapid deployment of a full-fledged cockpit (see FinBoard’s section) adapted to the specific requirements of banks, corporate treasuries and funds.
It is in general very easy to provide advices and make recommendations without having ever needed to implement them. “The devil is in the details” and in the volume of data to be managed. To be a “preacher by principles” is very comfortable. Being in front of a client and having to demonstrate how things actually work and to know what road is the most pragmatic to a given requirement is another issue. That’s what we do at FinMetrics.