FW: Reconciliation Across Risk Applications

-----Original Message-----
From: =09Beck, Sally =20
Sent:=09Wednesday, September 5, 2001 9:04 PM
To:=09Port, David
Subject:=09RE: Reconciliation Across Risk Applications

The project that Wanda mentioned in her original note is not meant to inclu=
de every operational measurement. Frankly, an initiative that broad would =
be bogged down and simply wouldn't work. Look for a separate e-mail respon=
se from me that adds some additional clarification to Wanda's good summary =
of the project at hand. =20

So that efforts are not unnecessarily duplicated, I would suggest that you =
and I get together so that I can share with you the processes and the repor=
ting that we do on a continuing basis relative to operational analysis (the=
term that we have used for several years for the old flash to actual monik=
er) , cash collection, A/R collection, and confirmation creation and execut=
ion. I know that Leslie Reeves reviewed our cash collections memos and ope=
rating reports with Wanda and Rick Carson. Rick called me afterwards and l=
iked what he saw. We have some more established reporting tools in the US,=
and Mike Jordan has been providing me with operating reports recently from=
London as well. These types of reports are on the radar screen for EES, b=
ut we have had bigger fish to fry than creating the reports -- such as sim=
ply getting some info! Through the internal audit process conducted by A=
rthur Andersen, all of the aforementioned processes are audited annually. =
The A/R review is complete and has been issued for 2001. Other reviews are=
planned or in progress. =20

I would hate to see separate initiatives kicked off around these operationa=
l processes without your having the benefit of a detailed understanding of =
what already exists. Call me if you want to follow up on this. Thanks. -=
-Sally=20

-----Original Message-----
From: =09Port, David =20
Sent:=09Wednesday, September 5, 2001 8:59 AM
To:=09Curry, Wanda; Buy, Rick; Piper, Greg
Cc:=09Beck, Sally; Apollo, Beth; Wilson, Shona; Victorio, Tom; Murphy, Ted;=
Bradford, William S.
Subject:=09RE: Reconciliation Across Risk Applications

Wanda

I believe this will give us a good sense of the validity of the information=
we rely on to make the assessments about risk that we are expected to make=
. I have mentioned this concept before - I envisioned an application (possi=
bly using our 3d tools) that would allow an interested user to assess data =
flow visually, similar to the way we control our physical assets and commod=
ity flow at ETS, for example.

The other key techniques whose results I believe we need comfort on are the=
"flash-to-actual" reconciliations, the process of tracking and chasing con=
firmations and perhaps cash collection/payment analyses. I think you may ha=
ve included these in your point "4", these all point in some way to the eff=
icacy of the mark-to-market results (which underpin most of the risk metric=
s we utilize), and trends in them, (or an absence of the analysis altogethe=
r), can indicate impending "controls" issues of the type we have witnessed =
here - so I'm a big fan.

Let me know if you need anything further from me.

DP =20

-----Original Message-----
From: =09Curry, Wanda =20
Sent:=09Tuesday, September 04, 2001 10:00 AM
To:=09Buy, Rick; Piper, Greg
Cc:=09Beck, Sally; Apollo, Beth; Wilson, Shona; Victorio, Tom; Murphy, Ted;=
Bradford, William S.; Port, David
Subject:=09Reconciliation Across Risk Applications

Rick and Greg,

I met with Sally and Beth on August 24th to discuss the operational risk ma=
nagement initiative requiring a reconciliation across all major risk applic=
ations. This reconciliation is necessary to validate the transfer of all d=
ata from=20
source systems, i.e. risk books, into risk applications which calculate VAR=
, provide credit exposures, feed Infinity with daily cash flows and ultima=
tely the DPR. =20

Sally and Beth, along with IT, have initiated a project to improve and moni=
tor the accuracy and efficiency of these daily interfaces. The scope inclu=
des a review of the processes which impact the accuracy of information, t=
iming of interfaces, production performance issues, inventory of books and =
improved controls over changes to book attributes, and the officialization =
process. They have agreed to add a requirement to provide, on a daily basi=
s, this reconciliation across all major risk applications.

The projected timeline to complete this project, including the reconciliat=
ion initiative, is 60 to 90 days. We will need to reassess the decision to=
combine these initiatives, if the GRMO timeline slips. =20
=20
This daily risk applications reconciliation will provide four key metrics n=
ot currently available:

1) the ability to track data "accuracy" in terms of the percentage of infor=
mation which transferred and processed correctly, vs. just unique "failures=
". How complete is the data?=20

2) the ability to validate the accuracy of exception reporting (are all fai=
lures included on the exception reports?)

3) the ability to validate Infinity cash flows

4) Reconciliation of values (volumes, PRMA &PRML and cash flows), not # of =
books processed.

Please call me if you would like to discuss.=20

Wanda Curry

=09

=20