ALM Audits

Tuff Risk assists clients with detailed audits on in-house asset liability management (ALM) processes, procedures, risk measurement and reporting.

If You Just Want A Rubber Stamp Audit…
We Are Not The Firm For You!

Sure, Tuff Risk follows the traditional audit processes, but we also look under the bed.

Banks and credit unions need a candid, independent, straight-talking, third-party review of Asset Liability Management (ALM) and treasury management operations that actually provides a roadmap to achieving industry best practices.  What you do not need is a review resulting in an audit letter complete with an attached to-do-list to achieve over the next year.

Tuff Risk knows what to look for because we know the tricks.  We know how to make ALM and Treasury software tell us anything we want.  We live and breathe ALM and Treasury and, like other audit firms, do not spend so much as 0.0001% of our time auditing oil companies, movie theatres or manufacturing firms.

How Do You Know?

ALM & Treasury are such specialized areas that it is difficult to for the typical auditor, let alone the average person, to truly understand what it is that treasury does.  Even when determined, given the dollar values concerned the next logical question should be “Are treasury operations being conducted properly?”

Sophisticated and assumption driven ALM software drives most balance sheet and off balance sheet decisions.  Today’s ALM software is not easily audited, due to the myriad of internal switches, assumptions and data inputs required to complete a risk analysis. Even software features not turned on impact analytical output.

Interest rate and FX derivatives are also complicated financial products.  Senior management may only receive high-level strategy papers or ALCO presentations concerning complex multifaceted derivative strategies. Once implemented, derivative strategies are seldom reviewed unless something serious goes wrong.

Tuff Risk has the experience to audit any ALM software in the marketplace. Tuff Risk senior staff and partners also have extensive treasury, risk management and banking backgrounds.  Tuff Risk sticks to its knitting, focusing exclusively on treasury operations, interest rate risk management and enhancing financial margin of banks and credit unions through better insight.

Finding The Right Level Of Expertise?

Tuff Risk senior staff and partners have all previously held senior risk management or treasury positions in some pretty large firms.  Other senior staff and partners have extensive banking experience, serving as CEOs, CFOs and/or AVPs.  Through Tuff Decisions, as sister company, Tuff Risk personnel introduce business intelligence into the banking industry.  Tuff Risk definitely has the experience you need.

With respect to education, Tuff Risk partners and Tuff Risk senior personnel each hold one or more of the following: a Master of Business Administration (MBA) degree, Chartered Accountant (CA) and/or Certified Public Accountant (CPA) designations.  Some of us have taught university at the Graduate level.  In addition, a number of partners are also CFA charter holders.

Tuff Risk specializes in treasury and asset liability management.

We have the knowledge and expertise to deliver an ALM & Treasury Audit Report… from a practitioner’s perspective.

Is There Is A Rogue Trader In Your Shop?

Rogue traders look just like you and me. The only way you can ensure there are no rogue traders in your treasury shop is to have an independent third-party review of your Asset Liability Management (ALM) and treasury management operations.

Policies may be in place.  Oversight might be stringent. Still, without regular review unauthorized activities can happen.  Barings Bank, Societe Generale and UBS each had recurring issues even at their level of control.

Even if authorized,someone with an understanding must make an assessment of the Treasury or ALM strategies undertaken by staff. If those who initiated the strategy are the only ones to truly understand the strategy, who but a seasoned practitioner can figure it all out? Tuff Risk encounters many misplaced derivative strategies that in the end could cost dearly.

Tuff Risk understands the business.

Auditing and the Link to Value

Tuff Risk assesses and validates the link between strategies and policies. We make sure all the rules make sense and that the rules are being followed. Tuff Risk reviews the strength of service-level objectives, risk management targets and treasury operations. It starts with the fundamentals.

We try to figure out just how much value your team is delivering with the means they have at their disposal and assess whether they need better tools.

Tuff Risk compares risk management activities with the appropriate benchmarks to make sure your core business fundamentals are intact and are being adhered to.

Warning Signals

Tuff Risk also interviews ALM & treasury management and staff, at all levels.  In addition to these findings, Tuff Risk adds a review of strategy, policy, objectives, guidelines and delegation of authorities. An examination of the treasury area, its organization and structure as well as  segregation of duties, is also performed.

A review of all dealings, settlements and recording procedures, key functions of any treasury operation, must be undertaken to ensure compliance.

Tuff Risk knows what to look for and has a deep understanding of the key issues of control failure concerning strategy and operations.  Most importantly, we can identify early warning signals of potential problems.  And this should be what you want.

Why Every Three Years?

Call us. Don’t call us.  But things change.  Regulations change. Staff change. Strategies change. Risk profiles change.

Add to this the change in technology and it is easy to appreciate why it is industry best practices for any financial institution to conduct an audit of its ALM & treasury operations every three years.

There are serious repercussions to senior management and the Board if things go sideways. They ultimately are held accountable.  The only way of ensuring proper safeguards are in place and to ensure guidelines and policies are being adhered to is to have an independent audit of your operations.

A lot can happen in three years!