When a lender in a syndicated lending structure issues a letter of credit or advances a swing line loan to a borrower, that lender becomes exposed to the rest of the syndicate lender group on a contingent basis. Since the financial crisis of 2008, understanding contingent exposures has become critical in managing risk.
Though the client could identify existing contingent exposure for letters of credit issued or swing line loans advanced, it did not have a clear systematic view into its total potential contingent exposure (i.e. the total amount up to which it could potentially issue letters of credit or advance swing line loans). As such, a solution was required to provide this view for risk management, regulatory reporting, and the business teams.
Design a solution to enhance the system of record to house and report on total potential contingent exposure on a facility-by-facility basis.
Resource and Budget Constraint
- The solution had to be delivered in coordination with a development team that had limited resources to contribute to the project.
Design for Multiple Endpoints
- Though the same basic data points were sought by all relevant departments, the solution had to be designed in such a way as to make the data points integrate seamlessly into every departments’ respective systems or reports.
- Once the solution was designed, a substantial clean-up effort to analyze and determine the correct data to populate, and then input the data, was required.
Consulting and Project Management
- Ensuring that all parties understand and agree to the qualitative aspects of the data to be captured.
- Brokering a consensus on prioritization of project deliverables between three different departments.
- Driving toward the most expedient solution to solve each department’s concern and minimize impact to development timeline.
- Defining new system fields for housing necessary data.
- Identifying mapping modifications to existing reports.
- Creating mock-up report models for development resources.
The solution was implemented outside of the engagement, but industry education, analysis, and design work was deemed valuable, and at the time it was anticipated that the project could be completed and the solution implemented by the required internal deadline.