Capital Management
 
The recent financial crisis has caused the market and regulators to focus on capital and risk management. The demands from the Basel Committee and regulators in the insurance field (Solvency II), and the requirements of stakeholders (investors, creditors) to be certain about the soundness and quality of financial institutions, will cause senior management to have less freedom in managing and optimizing the use of capital. Consequently, a prospective and proactive capital management approach becomes a critical "issue" to both leaders of large financial institutions and financial institutions that wish to remain independent.

Having a capital management model can help to answer the following questions:

 What are the criteria for determining the amount of capital that a financial entity needs to carry out its strategic plan?.
 What are the business segments that add value and which destroy it?.
 Is the performance of business segments acceptable in respect to the requirements of shareholders?.
 In a scenario of capital scarcity, which segments should be prioritized in the allocation of capital?

CLGroup has extensive experience in the field, providing advisories for several years to major financial institutions on implementation of their capital management models.

  Corporate Governance
 
Good Corporate Governance allows organizations to be more competitive, resulting in entities:

With improved order and control.
With planned objectives and strategies.
With efficient responses in their processes.
With processes that are consistent with the needs of the organization.
With recruitment of trained professionals.
That create a strategic vision of the sectors where they operate.
With efficient and responsible management of resources.

In the area of Corporate Governance, CLGroup offers comprehensive advisory services to its clients. After diagnosing the current situation, we identify the gap in respect to best practices, and propose an action plan to eliminate that gap. As part of the advisory, CLGroup offers support at every stage of the adaptation process towards good Corporate Governance. All this is based on unique methodologies and systems developed exclusively by our firm.

In this field, we have a strategic alliance with IAAG (www.iaag.com) a company that is internationally recognized in the field of Corporate Governance.

  Risk Management
 
a) Credit Risk
As stated in several Basel documents, "credit risk management weaknesses continue being the main cause of bankruptcy and banking crisis in the world. Therein lies the importance of banks establishing prudent and consistent policies and procedures ensuring that credit risks are identified, measured and managed both in the analysis of the counterpart individual as well as the portfolio."

Adequate credit risk management must include a definition and description of the five main phases of the credit process: i) Strategic portfolio planning; ii) Loan granting; iii) Loan management and follow up; iv) Credit control; v) Recovery and Collections.

In this field, our offer ranges from the preparation of a diagnosis pertaining to the operation of the Risk Area, preparation of provisions calculation models, design and development of advanced capital calculation models (Internal Ratings Based), preparation of a credit risk management manual, training of the risk team in the use and limitations of the credit risk measuring tool, support in the generation of reports associated to credit risk.

b) Market Risk
It is necessary that adequate market risk management be considered a constitutive part of the mission of the financial institution, in accordance with risk tolerance that is in tune with the markets in which it operates, and the profitability levels expected by shareholders.

In this area, our offer encompasses aspects such as evaluation of the market risk management infrastructure and cycle, review and preparation of methodological recommendations for financial risk modeling (including Stress Testing and Back Testing), support in the specification of computer system methodological requirements, preparation of a market risk management manual, training the risk team on the use and limitations of the risk measurement tool, supporting the generation of reports associated to financial risk, designing and supporting development of an internal market risk measurement model.

c) RORAC (Return on Risk Adjusted Capital)
A modern credit risk management scheme allows not only compliance with Basel II but is the first step toward a RORAC model. RORAC points to defining certain management techniques the common point of which is to compare the return on capital invested based on some type of risk-based adjustment.

In this field, our offer is to provide financial entities with a model for expected and unexpected losses due to credit risk to be used for pricing loans and in the evaluation of risk adjusted returns. Starting from the estimations of expected losses, unexpected losses, market rates, transfer costs, and commercial activity costs, this tool can determine the spreads to be assigned to types of clients, according to return on capital goals required by the different persons in charge of the area.

d) Recovery Models
Extrajudicial collection is one of the critical areas for the operation of any credit and financial company. Along this line, our contribution is to design collections strategies, establish adequate incentives so that collections is in line with the objectives of the financial institutions, define information requirements that are adequate for collections management, etc.


  Financial Oversight and Regulation
 
A modern vision in matters of financial oversight and regulation rests on a solid regulatory framework in matters of capital requirements and evaluation of assets, an oversight focus oriented to stimulating the inherent capacities of the financial institutions to measure, monitor and control risks, disclosure of information to the market and transparency. This is precisely the vision that is explicit in each of the pillars of Basel II, i.e., adjustment of capital and internal models, oversight on the part of regulators pertaining to the quality of the models and self-regulation of banks, and strengthening transparency of information and market discipline.

Along this line, our offer points toward generating a legal and regulatory framework, in situ and extra situ inspection manuals, training, models supporting the regulator’s tasks, in each of the critical areas of oversight, including capital adjustment, provisions, market risks, consolidated supervision and transactions with related parties, information transparency, criteria for granting licenses, treatment and departure mechanisms for institutions in problems.

  Corporate Financing
 
a) Structured Financing
On the basis of a comprehensive analysis of the Company's financial situation, the advisory contemplates from the definition stage to obtaining the required financing. Drawing on the latest developments in finance, we design a loan that best fits the profile of assets and liabilities of the company and its needs. Our advisory is comprehensive, encompassing all stages associated to obtaining a loan, including negotiating with financial institutions.

b) Corporate Bonds
This service is geared to supporting the company in the placement of bonds or fixed income instruments in the capital market. The advisory is comprehensive, and encompasses identification of funding needs, support in contract design, risk rating, selection of the placement agent, presentation before the Superintendency of Securities and Insurance (SVS) and the Risk Classification Commission (CRC ), road show process and sale of securities to investors.

C) Debt Restructuring
We identify the financing that best fits the company's financial position. We assess the situation and negotiate with banks and investors and carry the transaction through to its closing.

  Market Risks
 
Financial risk management is a growing concern for companies in order to achieve stability and focus on their own activities.

In complex, highly volatile markets with excess of information it is appropriate to rely on those who can make a difference actively managing in an integrated manner the financial risks of companies.

Often the biggest challenge consists in identifying and communicating to the rest of the company the risks that must be managed and appropriate measures for that purpose.

Years of experience providing advisory services to financial institutions allow us to offer our services to develop a platform to identify, measure and control financial risks, which combined with analysis of the macroeconomic scenario and stress, supports strategic decision making.

  Small Business
 
As markets traditionally exploited by financial institutions have increasingly been tightening their margins as a result of strong competition, financial institutions are progressively reorienting their strategic plans to incorporate financing of micro and small companies.

In this field, our offer contemplates a broad universe of areas, from business plans, operation of risk areas, operating platforms and specialized process technologies, etc. For this we have a strategic advisory service with MYPE Digital (see strategic alliances), a company formed by a team of specialists that participated in the design and implementation of the micro loans area of BancoEstado (BEME). As is well known, BEME is one of the most successful experiences at an international level in the area of micro entrepreneurs, with over 180 thousand clients in less than 10 years, low risk levels and sound profitability.

  Strategic Planning
 
a) Competitive Strategy
In a globalized environment, with constant entry of new players to the financial market, brokerage margins in traditional business are under growing pressure. Likewise, competitive pressure also tends toward decreasing administration costs and improving risk management techniques.

Along this line, our offer points toward generating financial service demand estimations, using various statistic techniques, identifying market opportunities and threats by studying the supply determinants in different market segments, and evaluating the internal capacities and weaknesses of the institutions themselves in order for them to be better able to face environmental pressures.

In this field, the range of solutions goes from reviewing collection and rates for financial services, to designing differentiating products and services that represent a sustainable competitive window, to optimizing the use of credit and market risk management tools, and to adopting cost models that allow institutions to have more efficient administrative costs.

b) Planning Tools
The strategic planning process is a well defined and organized organizational effort that leads to total specification of a firm’s strategy and the assignment of responsibilities for its execution. The description of this process in general terms is a complex matter, since it depends on the particular characteristics of each firm. However, most companies have basic points in common in the process of formal planning. These are the hierarchical levels that participate in the process, the planning tasks in each of these levels and the sequence in which these tasks must be performed.

Regarding this area, our offer points toward providing our clients with methodology that allows them to internalize the strategic planning process, through the use of adequate tools in each of the phases of the planning process.

  Institutional / Financial Designs
 
Public policies corresponding to the financial field, point toward generating instruments in areas lacking markets or where markets are incomplete, such as supporting financing of small companies using guarantee mechanisms, providing long-term resources, supporting financing of the export sector, risk capital, resources for financing upper education, etc.

In each of these fields, in addition to designing instruments, it is necessary to design and implement institutions to be in charge of implementing them.

Our offer in this field ranges from diagnosing the areas with market shortcomings that merit public policies, designing instruments and institutions, and accompanying in their implementation.

  Valuations
 
In financial markets there is a continuing need to value, from simple financial instruments (such as bonds) and other complexes (such as derivatives and options), loan portfolios, and financial institutions including complete all or some of these instruments.

In this field, our job is to make these valuations on behalf of our clients, using the latest valuation techniques in each area.

  Restructuring Financial Institutions
 
Since financial institutions face serious solvency problems, in certain cases it is necessary to adopt major surgery measures oriented toward restructuring them.

Here our offer consists on identifying, through diagnosis, the areas with the greatest weaknesses within an institution, and support their restructuring process, in areas such as commercial management, risk management, human resources or strategic orientation.

  Credit Bureaus
 
Credit bureaus play a central role in the development of credit markets. The bureaus help build "reputational collateral" based on payment behavior, which is more effective than legal rights and is free for everyone, allowing credit to be democratized. The greater availability of information stimulates financial development, reduces delinquency rates and increases access to credit.

In this field, our offer ranges from the preparation of a diagnosis, analysis of the economic feasibility of a credit bureau, analysis of the different institutional design applications for a credit bureau, evaluation of the legal framework in which a credit bureau will operate.


 
 
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