Consolidate your efforts into a single, integrated solution
Align assumptions and produce consistent results across all disciplines of risk and balance sheet management. Seamlessly and effortlessly deliver analysis to your executive team on how any change in conditions will impact earnings, enterprise value, liquidity, capital and earnings per share.
Never again feel as though you don’t have the time to effectively assess risk and recommend strategy.
Designed to be the foundation on which a sound balance sheet management discipline is built, Empyrean ALM™ is the most efficient and intuitive cash flow, forecasting and simulation engine on the market. Having been conceived during the last financial crisis, and designed and developed in its aftermath, Empyrean has been specifically designed for the challenges of modern risk management (ie. natively modeling credit loss as part of its core). We know that how well a system performs key tasks – the right mix of speed, flexibility, transparency, and ease of use – means as much, if not more, than check-the-box functionality:
Liquidity Stress Testing
Having a sound approach to managing liquidity risk has long been a pillar of prudent balance sheet management. It’s imperative to maintain a dynamic framework forecasting your liquidity position, its potential risks and failure points, and their impact on the performance, safety and soundness of the institution. This discipline is quickly evolving from being industry “best-practice” to regulatory requirement. How can you keep pace?
Depositor behaviors are inherently volatile. Changes in economic conditions, pricing strategy, competitive market dynamics, laws & regulations, technology and consumer preferences can all impact an institution’s deposit base. Despite this, most institutions have a limited understanding of their depositors, hindering their ability to predict future behavior. The view deposit gatherers and product managers have on relationships and/or products often do not align with that of risk or profitability. This will undoubtedly lead to misaligned incentives. It can also lead to difficult to explain fluctuations in key risk measures, like economic value of equity. In all, it makes understanding risk and return much more difficult and could result in incorrect assertions about an institution’s projected net interest income.
Capital Planning & Stress Testing (DFAST)
When done properly, capital planning and stress testing can be an indispensable management tool informing senior management as they set balance sheet strategy. To move beyond a pain-inducing compliance and model risk management exercise and become part of balance sheet management best-practices, operating efficiency must be achieved. Empyrean was designed for this purpose.
Transitioning to the new CECL accounting standard brings with it a host of challenges. For one, accounting and credit groups are not accustomed to the modeling and forecasting techniques required by CECL that are routinely used by balance sheet managers today. With the CECL process often owned by accounting and/or credit, it becomes difficult to maintain consistency with the assumptions and systems used in alternative forecasting arenas. In addition, balance sheet managers require estimating CECL in their forecasting and simulation processes to assess its impact on balance sheet strategy.
Macro-Economic Credit & Volume Models
Both capital stress testing and CECL require an institution to be able to quantitatively predict loss rates and volume levels under assumed economic conditions. Performing this function in a cost effective way while producing comprehensible, defensible and supportable models can be a challenge. Institutions very rarely have the data and/or the expertise to confidently develop these models themselves.
Balance Sheet Planning
There is a disconnect between most balance sheet management systems and those used in the budgeting process. For many, this leads to the frustrating reality of forecasting inconsistent net interest income across their planning and risk processes even though they’re using the same balance sheet forecast. How can they bring the same calculation precision and rigor of their balance sheet management discipline to the granular budgeting process?
Funds Transfer Pricing
Net Interest Income is the main performance metric for most financial institutions. Is the bank earning enough income to justify the capital allocated by shareholders? How much will NII be impacted by changes to interest rates and liquidity premiums? These are questions an institution must be able to answer in order to effectively manage NII across the various lines of business and through different rate cycles. This is done most effectively through introducing a funds transfer pricing process that is both robust and effective in immunizing the business units from interest rate and liquidity risks while transferring them to the mis-match center, where ALCO can effectively manage it.