Development of a Risk Based Approach (RBA) for Data Quality Test Transaction

Client Needs & Objectives

Core Objective: confirm reporting accuracy and confirm proper transformation of information to satisfy reporting requirements

Our client, a top-tier European Investment Bank, solicited us to:

  • Develop a Risk Based Approach to identify areas of risk susceptible of generating reporting misstatements
  • Design a Transaction Testing methodology that is data-driven to sample and test transactions to ensure reliance on data
  • Design a Report Compliance methodology that is instruction-driven to ensure that regulatory reports are free of misstatements
  • Run a Proof-of-Concept on all three pillars of the project

Our Approach

Risk Assessment

  • Annual risk assessment conducted by Data Governance’s SME to identify areas of risk of misstatements at the report, MDRM, and financial product levels
  • Risk assessment is to be revised quarterly as needed
  • Risks are assessed along a pre-defined list of criteria specific to each level (report, MDRM, product)

Transaction Testing

  • Testing methodology based on previous risk assessment, with three key milestones:
    • Data Gathering: definition of transaction population
    • Sampling: sample size based on statistical approach
    • Testing & Reporting: definition of a set of KPIs for reporting

Report Compliance

  • Testing timeline is designed based on report risk assessment outcome and report filing frequency
  • Top-down and bottom-up testing approaches

Main Deliverables

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Client Benefits & Main Results

Increased confidence due to:

- Custom methodology that is based on the bank’s areas of risks and unique reporting environment (products, systems, report filing history, etc.)

- Standardized methodology that strikes a balance between industry best practices and practicality that will ensure a solid framework and feasibility

Proof-of-Concept phase helped the Client understand the model’s strengths, as well as the required efforts to implement and run the methodology going forward