Risk Integrated Lets Lenders Analyze Profitability
- Jan 08, 2008
Risk Integrated’s Profitability Analysis Program, called PAP, provides lenders with an integrated profitability tool, according to the New York and British Isles-based privately-held software and consulting firm. The software, which used macroeconomic Monte Carlo simulation techniques, is of particular value to banks and asset managers, insurance and industrial companies, corporations and governments, who need to assess current risks on loans. PAP is designed for companies to use in preparation for Basel II compliance regulations, which are to be required in the United States beginning in January.Chris Marrison, CEO of Risk Integrated told CPN, “PAP is the first and most advanced system of its kind, as it simulates all the aspects involved in commercial property real estate—up to 1,000 different alternatives and variables.” These include changes in interest rates, tenants defaults, expirations of tenants leases, developments, cost overruns and construction delays. “The increase of property derivatives, complex swaps and options recently made available have added so many choices to structuring a new deal, that even were there no new international regulations to attend to,” he noted, “now more than ever before this kind of software for analysis is needed to make informed decisions.” Risk Integrated will provide a stand alone service, or will implement the system in-house. The 10 test-deals package costs $12,000, and includes a 60 page report. PAP was made available as part of a pilot program in Europe in several banks. “After they saw what this system could do,” said Marrison, “the banks then purchased and had it fully installed.” The system is in use in at least four banks in Europe, including the Anglo Irish Bank and West Bromwich Community Bank.With the present changes in real estate markets, plus the advent of Basel II, this service will help real estate lenders check, fine-tune and improve upon their existing risk measurement systems. Said Marrison, “We have spent the last six years in building and developing the system, and it is now very easy to quickly deliver the product.” Moreover it can be modified and the firm now is exploring tailoring it for specific portfolios, such as those containing subprime mortgages, as well as extending the risk-assessment system to other finance projects such as those involved with power plants, water-treatment facilities and mining, oil and gas projects.