Migrating risk models to the cloud

Helping Canadian financial institutions improve resilience, agility and cost-efficiency

Adopting cloud technology has become a necessity for businesses like financial institutions to improve resilience, agility and cost-efficiency. One of the biggest opportunities for cloud computing in banking activities is in risk management. As risk managers are asked to process increasingly larger amounts of data, cloud technologies can support management of both financial and non-financial risks.

We can help Canadian financial institutions use the right migration tools and follow best practices to enable an efficient cloud migration. We have a diverse team that brings deep knowledge of technology, risk and strategic considerations to help organizations successfully migrate risk models to the cloud.

Why migrate your risk model to the cloud?

Migrating risk models to the cloud offers several key benefits to financial institutions, including:

Cost savings and efficiencies:

Cloud solutions can significantly reduce capital expenditure and provide cost-efficient options for data storage, processing and analytics. Organizations can also improve efficiency through automated orchestration of modelling codes.

Enhanced business continuity and disaster recovery:

Cloud infrastructure outperforms local data warehouses through automated backups, geographical redundancy and failover mechanisms. This results in significantly reduced downtime during disruptions compared to local data warehouses, which often require manual backup processes.

Scalability:

The cloud offers the ability to scale resources up as needed, providing financial institutions with the agility required for risk assessment and mitigation.

Data security and compliance:

Advanced security measures enable regulatory compliance and protection against evolving threats while requiring less effort than local data warehouses and reducing the burden of maintaining and updating security.

Advanced analytics and AI integration:

Cloud-based data analytics and machine learning tools help financial institutions enhance risk assessment, fraud detection and decision making.

The cloud migration journey for risk models

Cloud migrations are complex and require high levels of planning, expertise and automation to be successful. Although artificial intelligence and automation can help, it’s important to be aware of the limitations, particularly in a migration strategy involving the conversion of legacy codes to new technologies and languages. Before starting a migration, financial institutions should evaluate their maturity in adopting cloud technologies.

Key steps to follow include:

The financial institution establishes its business objectives for cloud migration. These objectives could include improved performance, increased agility, cost savings or enhanced scalability. Financial institutions should do a preliminary review of their information technology infrastructure during this phase to see what resources are available and how they might be migrated. They should also assess their level of cloud readiness, identifying any skills or technological gaps they may need to fill before a migration can take place.

The financial institution creates a detailed migration plan, which may include identity management, project organization, networking, app categorization and the creation of a prioritized strategy and roadmap. The business reasons for adopting the cloud, resource requirements and financial and business constraints all play a role in choosing the migration strategy.

The financial institution executes a deployment process to move workloads to the cloud. When migrating risk models, data structure and code design/language may need to be modified to align with the cloud environment, enabling compatibility, optimization and adherence to security and regulatory standards specific to the financial services industry.

This phase involves the management of workloads in the cloud environment, including monitoring performance and managing resources. Financial institutions will need to implement rigorous security measures, such as encryption and access controls, to protect sensitive data and ensure compliance with regulations.

The financial institution looks for ways to improve the performance and efficiency of its cloud environment. This phase can involve refining cloud operations, identifying opportunities for further cost savings and implementing cloud-native features or services to enhance performance.

In this phase, financial institutions begin to make the most of cloud-native technologies and capabilities to enhance operations from the perspective of performance, scalability, disaster recovery, costs and training. They also start to embrace machine learning and AI technologies integrated into the cloud environment to harness its full potential.

How we can help

Our team of experienced cloud and financial engineers and data scientists can help you make the most of your cloud migration journey. Key areas we can support with include:

design and implementation of migration plan;

focused training and employee upskilling;

data repointing and validation;

model assessments and code design;

program development and code translation; and

discrepancy identification and documentation.

We’ve successfully worked with other organizations to help them achieve sustained outcomes through their cloud migrations. After migrating its data to the cloud and converting its legacy programming code to new technologies, one organization we worked reduced execution time related to its International Financial Reporting Standard (IFRS) 9 process by about 85% while maintaining uninterrupted access to core systems.

The process was about 60% more efficient, due in part to replacement of previously manual steps with the automated orchestration of the converted codes. The process also reduced the need for exchanges between modelling, IT and data analytics teams, further saving the organization time.