Capital Allocation
Business Case
- No clear understanding of price to risk relationships existed. There was an incorrect perception of returns by product.
- Poor price to risk alignment existed. Only 1 product leverage existed for the entire business. This could result in loss of market share caused by over-pricing low risk products and economic losses caused by under pricing riskier products.
Actions Taken
- Teamed with the business unit Chief
Risk Officers and Chief Financial Officers to develop product
segmentation candidates.
- Modeled and quantified risk for candidate set. Developed analytics supporting proposed leverage from multiple approaches, implied by pricing, securitization and benchmarks.
- Incorporated multiple approaches for exploration beyond candidate segments.
Business Results
- Developed 20+ new product leverage categories, providing significant improvement in price to risk alignment which resulted in releasing $MM+ in capital.
- Dramatically improved data quality, supporting processes, portfolio transparency, portfolio reporting, consistent application of underwriting approach, and overall governance.