The Challenge
Our client was focused on building a comprehensive corporate risk assessment app. Assessing climate risk associated with corporate lending is tedious, particularly when a lengthy and comprehensive questionnaire must be completed for each credit application. Our client required an efficient way to streamline this process.
The Objective
Mitigating climate risk associated with corporate lending
- To enable their vision of mitigating climate risk, our client decided to implement a Climate Risk Assessment (CRA) application for corporate lending
- The CRA would leverage BlackRock's Baringa Climate Change Scenario model to automate the climate risk assessment process
- This process would ensure that all in-scope credit applications are assessed for potential climate-related risks before approval
The Solution
HCLTech was focused on creating a lasting impact with the application we were developing.
As a part of the engagement:
- Our HCLTech team developed an application containing approximately 50-75 industry-specific multiple-choice questions that determined the climate risk score and acted as input for corporate credit/lending teams to quantify associated climate risk
- These questions were divided into five categories with individual score/BRAG (Brown, Red, Amber, Green) status and overall score
- The key categories were governance and disclosure, gross physical risk, physical risk adaption, gross transition risk and transition risk mitigation
- A black or red BRAG status required a further assessment from a Climate Risk Approver, while amber and green could be approved by the Risk Manager
- HCLTech was now helping clients automate the workflow from corporate lending front-end systems with improved configurability of the questionnaire
The Impact
- An improved climate risk management through transformation was achieved
- CRA application was now integrated with the existing bank systems, which was a major step in climate risk management, an emerging area for our client
- The application was also integrated into the broader enterprise risk management framework and rolled out globally across all CCIB markets (44+ countries) with 550+ users
- As a next step, CRA applications also helped assess the historical credit applications that were still in the credit value chain
- Our client realized improved adoptability as HCLTech also built managerial dashboards with KPIs related to application usage and performance
