The enterprise software industry is being transformed by substantial investor capital, Cloud 2.0, artificial intelligence, data protection, preferred platforms, and a talent shortage, leading stakeholders of all kinds to make big changes, and big choices.
The 2016 Strategic Hospital Priorities Study examines the current direction of the industry and, in particular, how Medtech companies can capitalize on the many needs of hospital administrators.
While the healthcare market has steadily evolved since L.E.K. Consulting issued its first hospital study in 2010, many of the same trends remain in place — among them consolidation, non-acute care integration, accountability, technology enhancements and novel pricing schemes.
This Executive Insights addresses a number of key topics, including:
Hospital administrator’s chief priorities
Most valuable medtech services
Focus on IT spending
Outlook for outsourcing
Digital and Innovation Strategies for the Infrastructure Industry: Tim McManu...Smart City
Productivity in the engineering and construction industry has been stagnant for decades. The proliferation of digital solutions has made it difficult for users to develop a coherent strategy. Companies who are able to successfully navigate the new digital landscape are on the brink of a transformation that will see top performers reduce overall project costs by 20-45%. However, digital transformations require developing digital capability across all aspects of the organization. Therefore, each entity involved in the industry must understand its critical challenges in order to guide its path to increased digital capability.
A.T. Kearney Consolidation of the US Banking IndustryKearney
More and more banked consumers are migrating from small to large banks, flagging the accelerated consolidation of the retail banking industry in the years to come.
When, Where & How AI Will Boost Federal Workforce Productivityaccenture
Accenture developed an economic model to understand how AI will impact the U.S. federal workforce, through automation and augmentation. Learn more: https://accntu.re/3hsRG8O
One in four customers is planning to either use branches less or stop visiting branches altogether after the COVID-19 crisis, according to new BCG retail banking consumer “pulse” survey.
The enterprise software industry is being transformed by substantial investor capital, Cloud 2.0, artificial intelligence, data protection, preferred platforms, and a talent shortage, leading stakeholders of all kinds to make big changes, and big choices.
The 2016 Strategic Hospital Priorities Study examines the current direction of the industry and, in particular, how Medtech companies can capitalize on the many needs of hospital administrators.
While the healthcare market has steadily evolved since L.E.K. Consulting issued its first hospital study in 2010, many of the same trends remain in place — among them consolidation, non-acute care integration, accountability, technology enhancements and novel pricing schemes.
This Executive Insights addresses a number of key topics, including:
Hospital administrator’s chief priorities
Most valuable medtech services
Focus on IT spending
Outlook for outsourcing
Digital and Innovation Strategies for the Infrastructure Industry: Tim McManu...Smart City
Productivity in the engineering and construction industry has been stagnant for decades. The proliferation of digital solutions has made it difficult for users to develop a coherent strategy. Companies who are able to successfully navigate the new digital landscape are on the brink of a transformation that will see top performers reduce overall project costs by 20-45%. However, digital transformations require developing digital capability across all aspects of the organization. Therefore, each entity involved in the industry must understand its critical challenges in order to guide its path to increased digital capability.
A.T. Kearney Consolidation of the US Banking IndustryKearney
More and more banked consumers are migrating from small to large banks, flagging the accelerated consolidation of the retail banking industry in the years to come.
When, Where & How AI Will Boost Federal Workforce Productivityaccenture
Accenture developed an economic model to understand how AI will impact the U.S. federal workforce, through automation and augmentation. Learn more: https://accntu.re/3hsRG8O
One in four customers is planning to either use branches less or stop visiting branches altogether after the COVID-19 crisis, according to new BCG retail banking consumer “pulse” survey.
Right Cloud Mindset: Survey Results Hospitality | Accentureaccenture
Looking two years ahead: Functional objectives along with technology related challenges and top five areas of investment for hospitality companies. Learn more: https://accntu.re/3uB9LL1
IBOR transition: Opportunities and challenges for the asset management industryEY
EY Wealth & Asset Management explores the practical implications and the way forward for the transition to the new risk-free rates. This presentation aims to help asset managers and asset owners explore IBOR transition strategies that are compliant and future-focused.
China Exit or Co-Investment Opportunities for German PE InvestorsL.E.K. Consulting
L.E.K.'s Karin von Kienlin recently presented at BVK on a study conducted by L.E.K. Munich and Shanghai. They wished to:
- Understand developments in Chinese equity investments in both the domestic China / pan-Asian market and cross-border investments between China and Germany / Europe
- Identify trends in likely future investment behavior and its drivers
- Defining success factors both for Chinese and German investors / corporates as to how to benefit from the potential opportunities of cross-border investments and cooperation
Learn more in the presentation here.
New trends have moved marketing the cusp of a new golden age. To deliver on the promise, marketing needs to execute on the 5S approach: science, simplicity, substance, speed, and story. This presentation walks through what marketers and business leaders need to get right to execute all of them. This presentation is based on a public webinar given by McKinsey partners Jonathan Gordon and Jesko Perrey.
Find out more from our Marketing and Sales practice: http://www.mckinsey.com/client_service/marketing_and_sales
BCG’s 2018 global challengers—100 rapidly globalizing companies from emerging markets—are getting ahead of the competition by using digital technologies.
Summary: Even in a time of high biopharma valuations, adopting an activist mentality adds rigor to capital allocation and strategic decision-making, improving not just returns to shareholders but long-term value creation. Therefore, biopharma management teams and boards of directors should proactively assess the “fitness” of their capital allocation strategies and their alignment with operational performance goals by taking an outsider’s view of the business even when times are good — and before a material stumble provides a compelling reason for an outsider to act. For more on this topic, go to http://www.ey.com/GL/en/Industries/Life-Sciences/EY-vital-signs-how-fit-is-your-capital-allocation-strategy.
Joining Forces: Interagency Collaboration and "Smart Power"Booz Allen Hamilton
Has U.S. defense, diplomacy and development adopted a “smart power” approach? In this follow-up to a 2010 report, the Government Business Council (GBC) evaluates progress towards increased interagency collaboration and how budget pressures may change foreign policy. Moderator is GBC's Associate Director of Research Erin Dian Dumbacher and Speakers include Booz Allen senior associate's Cheryl Steele and Jonathan Allen. Download the full report here: http://www.govexec.com/gbc/report/smart_power_2011/
Learn more about Smart Power: http://www.boozallen.com/smartpower
L.E.K. Consulting recently surveyed more than 200 U.S. brand managers and packaging stakeholders at consumer packaged goods companies to understand their packaging needs and views on trends driving demand.
The survey focused on topics that include:
- Brand trends and their effect on packaging demand
- Shifts within packaging (e.g., new materials, packaging innovations)
- Perspectives on packaging demand (including forecast spend on packaging for their brands)
This Executive Insights analyzes key findings from this proprietary research
Like other prosperous American cities, greater Seattle currently finds itself in the unenviable position of possessing both enormous amounts of wealth and staggering levels of homelessness. These slides accompany the McKinsey & Company report that looks at homelessness in King County, published in January 2020.
On June 21st, PwC’s Health Research Institute (HRI) released its annual Medical Cost Trend: Behind the Numbers 2017 report. PwC’s HRI anticipates a 6.5% growth rate for 2017—the same as was projected for 2016. The report identifies the key inflators and deflators as well as historical context to better understand the medical cost trend for 2017. Increases in the trend due to utilization of convenient care access points and an uptick in behavioral healthcare benefits for employees are being offset by more aggressive strategies by pharmacy benefit
TMT Outlook 2017: A new wave of advances offer opportunities and challengesDeloitte United States
Important trends continue to shape the technology, media, and telecommunications (TMT) industry. What developments should you anticipate in 2017? https://subscriptions.deloitte.com/default.aspx?eventid=1323075
Apache Hadoop Summit 2016: The Future of Apache Hadoop an Enterprise Architec...PwC
Hadoop Summit is an industry-leading Hadoop community event for business leaders and technology experts (such as architects, data scientists and Hadoop developers) to learn about the technologies and business drivers transforming data. PwC is helping organizations unlock their data possibilities to make data-driven decisions.
Top 8 Insights From the 2018 Beauty, Health & Wellness SurveyL.E.K. Consulting
Think nutritional supplements and skincare are of interest only to consumers of a certain age? Think again. According to L.E.K. Consulting’s third installment of a biennial survey of the healthy living marketplace, this one focusing on nutrition and skincare, some 80% of health and wellness (H&W) consumers across generations — from millennials to baby boomers — are highly engaged with both categories.
The survey captured insights from more than 1,600 respondents, representing roughly 77% of the U.S. adult population who identify with H&W themes, and generated eight key insights across categories. Together these insights make clear that consumer interest in nutritional supplements and skincare often lasts a lifetime.
Federal Technology Vision 2021: Full U.S. Federal Survey Findings | Accentureaccenture
Leaders don’t wait for a new normal, they build it. The Accenture Federal Technology Vision 2021 identifies five key trends that agencies must address to lead in the post-pandemic world. Explore the full survey findings here. https://accntu.re/3sIBI0k
Foundry's Data & Analytics research was previously published under the IDG Communications brand. This study provides insight into the data-driven initiatives IT decision-makers (ITDMs) have on their radar, challenges associated with their data strategy, and the tools and solutions they plan to invest in to assist their goals.
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he way that big data pervades most organizations today creates a dynamic environment for C-level executives to explore how it can and should be used strategically to add business value.
While each C-level executive views big data through a unique lens, a strong consensus exists among them about the need for effective big data analytics across their organizations.
This Economist Intelligence Unit report shows that senior executives are optimistic about both the capabilities of big data and the impacts such data can have on their businesses.
Download the report to get the whole story.
Right Cloud Mindset: Survey Results Hospitality | Accentureaccenture
Looking two years ahead: Functional objectives along with technology related challenges and top five areas of investment for hospitality companies. Learn more: https://accntu.re/3uB9LL1
IBOR transition: Opportunities and challenges for the asset management industryEY
EY Wealth & Asset Management explores the practical implications and the way forward for the transition to the new risk-free rates. This presentation aims to help asset managers and asset owners explore IBOR transition strategies that are compliant and future-focused.
China Exit or Co-Investment Opportunities for German PE InvestorsL.E.K. Consulting
L.E.K.'s Karin von Kienlin recently presented at BVK on a study conducted by L.E.K. Munich and Shanghai. They wished to:
- Understand developments in Chinese equity investments in both the domestic China / pan-Asian market and cross-border investments between China and Germany / Europe
- Identify trends in likely future investment behavior and its drivers
- Defining success factors both for Chinese and German investors / corporates as to how to benefit from the potential opportunities of cross-border investments and cooperation
Learn more in the presentation here.
New trends have moved marketing the cusp of a new golden age. To deliver on the promise, marketing needs to execute on the 5S approach: science, simplicity, substance, speed, and story. This presentation walks through what marketers and business leaders need to get right to execute all of them. This presentation is based on a public webinar given by McKinsey partners Jonathan Gordon and Jesko Perrey.
Find out more from our Marketing and Sales practice: http://www.mckinsey.com/client_service/marketing_and_sales
BCG’s 2018 global challengers—100 rapidly globalizing companies from emerging markets—are getting ahead of the competition by using digital technologies.
Summary: Even in a time of high biopharma valuations, adopting an activist mentality adds rigor to capital allocation and strategic decision-making, improving not just returns to shareholders but long-term value creation. Therefore, biopharma management teams and boards of directors should proactively assess the “fitness” of their capital allocation strategies and their alignment with operational performance goals by taking an outsider’s view of the business even when times are good — and before a material stumble provides a compelling reason for an outsider to act. For more on this topic, go to http://www.ey.com/GL/en/Industries/Life-Sciences/EY-vital-signs-how-fit-is-your-capital-allocation-strategy.
Joining Forces: Interagency Collaboration and "Smart Power"Booz Allen Hamilton
Has U.S. defense, diplomacy and development adopted a “smart power” approach? In this follow-up to a 2010 report, the Government Business Council (GBC) evaluates progress towards increased interagency collaboration and how budget pressures may change foreign policy. Moderator is GBC's Associate Director of Research Erin Dian Dumbacher and Speakers include Booz Allen senior associate's Cheryl Steele and Jonathan Allen. Download the full report here: http://www.govexec.com/gbc/report/smart_power_2011/
Learn more about Smart Power: http://www.boozallen.com/smartpower
L.E.K. Consulting recently surveyed more than 200 U.S. brand managers and packaging stakeholders at consumer packaged goods companies to understand their packaging needs and views on trends driving demand.
The survey focused on topics that include:
- Brand trends and their effect on packaging demand
- Shifts within packaging (e.g., new materials, packaging innovations)
- Perspectives on packaging demand (including forecast spend on packaging for their brands)
This Executive Insights analyzes key findings from this proprietary research
Like other prosperous American cities, greater Seattle currently finds itself in the unenviable position of possessing both enormous amounts of wealth and staggering levels of homelessness. These slides accompany the McKinsey & Company report that looks at homelessness in King County, published in January 2020.
On June 21st, PwC’s Health Research Institute (HRI) released its annual Medical Cost Trend: Behind the Numbers 2017 report. PwC’s HRI anticipates a 6.5% growth rate for 2017—the same as was projected for 2016. The report identifies the key inflators and deflators as well as historical context to better understand the medical cost trend for 2017. Increases in the trend due to utilization of convenient care access points and an uptick in behavioral healthcare benefits for employees are being offset by more aggressive strategies by pharmacy benefit
TMT Outlook 2017: A new wave of advances offer opportunities and challengesDeloitte United States
Important trends continue to shape the technology, media, and telecommunications (TMT) industry. What developments should you anticipate in 2017? https://subscriptions.deloitte.com/default.aspx?eventid=1323075
Apache Hadoop Summit 2016: The Future of Apache Hadoop an Enterprise Architec...PwC
Hadoop Summit is an industry-leading Hadoop community event for business leaders and technology experts (such as architects, data scientists and Hadoop developers) to learn about the technologies and business drivers transforming data. PwC is helping organizations unlock their data possibilities to make data-driven decisions.
Top 8 Insights From the 2018 Beauty, Health & Wellness SurveyL.E.K. Consulting
Think nutritional supplements and skincare are of interest only to consumers of a certain age? Think again. According to L.E.K. Consulting’s third installment of a biennial survey of the healthy living marketplace, this one focusing on nutrition and skincare, some 80% of health and wellness (H&W) consumers across generations — from millennials to baby boomers — are highly engaged with both categories.
The survey captured insights from more than 1,600 respondents, representing roughly 77% of the U.S. adult population who identify with H&W themes, and generated eight key insights across categories. Together these insights make clear that consumer interest in nutritional supplements and skincare often lasts a lifetime.
Federal Technology Vision 2021: Full U.S. Federal Survey Findings | Accentureaccenture
Leaders don’t wait for a new normal, they build it. The Accenture Federal Technology Vision 2021 identifies five key trends that agencies must address to lead in the post-pandemic world. Explore the full survey findings here. https://accntu.re/3sIBI0k
Foundry's Data & Analytics research was previously published under the IDG Communications brand. This study provides insight into the data-driven initiatives IT decision-makers (ITDMs) have on their radar, challenges associated with their data strategy, and the tools and solutions they plan to invest in to assist their goals.
Views From The C-Suite: Who's Big on Big DataPlatfora
he way that big data pervades most organizations today creates a dynamic environment for C-level executives to explore how it can and should be used strategically to add business value.
While each C-level executive views big data through a unique lens, a strong consensus exists among them about the need for effective big data analytics across their organizations.
This Economist Intelligence Unit report shows that senior executives are optimistic about both the capabilities of big data and the impacts such data can have on their businesses.
Download the report to get the whole story.
Projecting Impact of Non-Traditional Data and Advanced Analytics on Delivery ...CGAP
In developing economies, low-income consumers do not have access to many financial products due to both a) suppliers’ lack of will and capability to develop products and business models appropriate to serving the bottom of the pyramid and b) a number of demand-side barriers involving price, consumer awareness, and product accessibility
Low-income consumers in developing countries are generating increasing volumes of non-traditional data on their behaviors and preferences, through their use of mobile phones, their physical and mobile payments and transactions, and their retail spending, and these data are being captured, structured, and stored by a variety of institutions and organizations
Financial services providers in developed and developing countries alike have begun to structure and analyze these non-traditional data on consumer behavior and preferences to lower delivery costs, expand customer awareness, and innovate on product design and service models
In order to assess the impact of leveraging non-traditional data and advanced analytics, we examined the way in which these applications might lower the cost structures of two financial products: microloans and microinsurance. We additionally assessed the potential for these applications to facilitate the development of new types of liquidity products tied to transactions accounts
To gain granular insights in the context of a particular market, we conducted our research in Tanzania, a country with low levels of financial services penetration but where mobile money usage is relatively high and where there are enough low-income focused financial products in the market to form the basis for our analysis
Our analysis suggests that NDAA could lower delivery costs by 15% to 30% for lending and insurance products, and facilitate the development of a low-cost credit line tied to a mobile wallet:
Value creation with big data analytics for enterprises: a surveyTELKOMNIKA JOURNAL
The emergence of Big Data applications has paved the way for enterprises to use Big Data as a value-creation strategy for their business; however, the majority of enterprises fail to know how to generate value from their massive volumes of data. Big Data Analytics results can help the enterprises in better decision-making and provide them with additional profits. Studying different researches dedicated to value creation through Big Data Analytics. This paper (a) highlights the current state of the art proposed for creating value from Big Data Analytics, (b) identifies the essential factors and discusses their effects upon value creation, and (c) provides a classification of the cutting-edge technologies in this field.
3 Strategies to drive more data driven outcomes in financial servicesTamrMarketing
What are the main obstacles in the way of successful digital transformations within large financial organizations?
Read the blog and watch the full webinar here >> https://www.tamr.com/blog/webinar-3-strategies-to-drive-more-data-driven-outcomes-in-financial-services/
Analytic Transformation | 2013 Loras College Business Analytics SymposiumCartegraph
Loras College is proud to present our annual Business Analytics Symposium on March 27, 2014 at the Grand River Center in Dubuque, IA. Industry experts will share their insights about the evolving field of business analytics opportunities. Learn about everything from best practices when analyzing data to the importance and benefits of building a culture of analytics within your organization.
To learn more, secure your seat or to take advantage of group discounts visit www.loras.edu/bigdata.
Predictive analytics are increasingly a must-have competitive tool. A well-defined workflow and effective decision modeling approach ensures that the right predictive analytic models get built and deployed.
What Are the Challenges and Opportunities in Big Data Analytics.pdfMr. Business Magazine
Big data analytics is the use advanced analytic techniques for data that is very large and unstructured. The proliferation of digital information, coupled with advanced analytics capabilities, has ushered in an era where data isn’t just generated; it’s harnessed as a potent force for transformation.
Supervised and unsupervised data mining approaches in loan default prediction IJECEIAES
Given the paramount importance of data mining in organizations and the possible contribution of a data-driven customer classification recommender systems for loan-extending financial institutions, the study applied supervised and supervised data mining approaches to derive the best classifier of loan default. A total of 900 instances with determined attributes and class labels were used for the training and cross-validation processes while prediction used 100 new instances without class labels. In the training phase, J48 with confidence factor of 50% attained the highest classification accuracy (76.85%), k-nearest neighbors (k-NN) 3 the highest (78.38%) in IBk variants, naïve Bayes has a classification accuracy of 76.65%, and logistic has 77.31% classification accuracy. k-NN 3 and logistic have the highest classification accuracy, F-measures, and kappa statistics. Implementation of these algorithms to the test set yielded 48 non-defaulters and 52 defaulters for k-NN 3 while 44 non-defaulters and 56 defaulters under logistic. Implications were discussed in the paper.
# Project 03 - Data Mining on Financial Data
In this project, various models like Logistic Regression, KNN, SVM, and Random Forest have been applied to three finance-related datasets in order to discover the insights from the datasets. The methods will be applied to the datasets in R studio and corresponding outputs will be shown in this paper. Then the applied methods will be compared with each other to identify how well the method is performing on each of the datasets and then finally the better method will be chosen for each of the datasets. The methods were explained in detail along with their advantages with the help of the information from the relevant papers. Every method which has been applied to the datasets has been confirmed whether it follows the data mining methodologies. Data mining methodologies like CRISP-DM, KDD and SEMMA will also be explained in detail via this paper. The process flow of the data mining methodologies will be explained and also will be made sure that whether the process flow has been followed while applying each method on the datasets. Data mining is now considered as a major factor in the risk management process of financial institutions. Even though various data mining tools are existing in the market, this paper allows readers to understand how the algorithm works on the dataset and how to justify whether an algorithm’s prediction.
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Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
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Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
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Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
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Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
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1. CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of McKinsey & Company
is strictly prohibited
March, 2022
Discussion Document
Data and analytics
innovations in Credit
Portfolio Management
2. 2
McKinsey and
IACPM together
completed a survey
on new
developments in
data and analytics
for credit portfolio
management
The survey had 3
main objectives
Survey range of industry practice on:
Ÿ Emergence of alternative data sources for credit risk
identification, assessment, and monitoring
Ÿ Related evolution of analytics tools
Understand degree to which different data types and
analytical approaches are in use/under consideration
across institutions, geographies, subsectors, and CRE/C&I
portfolio segments
Develop insights on current state and path forward for
participants to incorporate next generation data and
analytics
CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of McKinsey & Company is strictly prohibited
3. McKinsey & Company 3
44 financial institutions participated in the survey from across
Americas, APAC, and EMEA
Asia Pacific
Americas
Europe Middle East and Africa
Source: McKinsey/IACPM Survey on data and analytics innovations in Credit Portfolio Management – October 2021
CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of McKinsey & Company is strictly prohibited
4. McKinsey & Company 4
Content Summary of survey results 20 mins
Perspectives on selected topics 30 mins
Questions 10 mins
CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of McKinsey & Company is strictly prohibited
5. McKinsey & Company
Summary of results
D Investment and
Strategic Goals
Top investment areas have been data tech and data acquisition. Over the next 2 years, participants expect
a greater role of innovative data and advanced analytics in improving Credit Strategy and Client
Experience
A Trends Over the next 2 years, larger number of participants expect significant increase in the use of internally
developed advanced techniques and new types of external data
F Impact Use of innovative data and/or advanced analytics improves model accuracy , turn-around-time, automated
decisioning and time spend on analysis, with higher benefit observed in the SME segment
E Use cases Machine learning models are primarily gaining traction for Risk Scoring of SMEs and Early Warning across
the board
Innovative external data sources are more used for Corporate segment while SME segment uses more
innovative internal data sources
B Challenges Data quality assessment and talent management are the top challenges for use of both advanced
analytics and innovative data solution
C Climate Majority of the participants believe that Climate and ESG is the next biggest challenge for credit
assessment
Source: McKinsey/IACPM Survey on data and analytics innovations in Credit Portfolio Management – October 2021
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A: Over the next 2 years, a vast majority of participants expect
significant increase in the use of new types of external data and
internally developed advanced techniques
Source: McKinsey/IACPM Survey on data and analytics innovations in Credit Portfolio Management – October 2021
Expectation for the next 2 years
In the past 2 years
How has your firm’s data/analytics for credit decisions changed in the past 2 years and how do
you expect it to change in the coming 2 years?
In the past 2 years, over 60% of
the participants have seen an
increase in the:
Ÿ Use of new types of internal
and external data
Ÿ Use of internally developed
advanced techniques
Ÿ Size of data and analytics
team
Over the next 2 years, even
larger % of participants expect
this trend to continue
% participants see increase in trends
72%
74%
Increased use of new types
of internal data
Increased use of internally developed
machine learning and other
advanced analytics techniques
Increased use of vendor-developed
machine learning and other
advanced analytics techniques
Increased use of new types
external data
Change in the size of the
data & analytics team
Change in share of automated
credit approvals
66%
64%
49%
32%
91%
81%
59%
79%
81%
66%
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B: Data quality assessment and talent management are the top
challenges for use of both advanced analytics and innovative
data solution
42
49
14
26
26
40
9
42
7
2
5
63
42
30
28
28
19
14
14
12
2
2
Validation difficulty
Cost of data
Data Quality
Ability to explain
Regulatory
Resources
Skepticism/Probability
Unmet expectations
Risk concerns
Other
Fragmentation
Currently, what are the major challenges faced by your firm that constrain the use of innovative
data or advanced analytics (e.g., machine learning and AI)?
Top 3 challenges for use of
innovative data solutions
Top 3 challenges for use of
advanced analytics solutions
Percentage
Major challenges for use of
advanced analytics solutions
are:
Ÿ Attract, retain and develop
resources
Ÿ Ability to explain
Ÿ Data quality
Ÿ Validation
While for using innovative data,
key challenge in data quality
assessment and talent
Source: McKinsey/IACPM Survey on data and analytics innovations in Credit Portfolio Management – October 2021
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8. McKinsey & Company 8
C: 86% of the participants believe that Climate and ESG is the next
biggest challenge for credit assessment
86
58
51
42
9
7
Post COVID-19 model adjustments
and uncertainties
Capital, Provisioning, or regulatory
stress testing model requirements
Climate and ESG
Incorporating Machine Learning
models within regulatory and
risk constraints
Effectively competing with attackers
Other – please specify
27: What are the biggest challenges facing credit risk
and credit portfolio management analytics in the next 2-
3 years?
Percentage
25: For incorporating the impact of climate risk ,are
you using existing loss models with climate shock
applied to input variables? Or are you developing
new loss models to assess it?
Percentage
86% of the participants believe
climate and ESG is the next
biggest challenge for credit
assessment, followed by
COVID-19 adjustments, capital
and regulatory exercise, and
using machine learning models
One third of the participants plan
to use existing credit models to
translate the climate impact to
credit risk and another one third
of the participants plan to
develop new loss models for
climate assessment
35
33
33 Using existing models
Developing new loss models
Not yet exploring
Source: McKinsey/IACPM Survey on data and analytics innovations in Credit Portfolio Management – October 2021
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9. McKinsey & Company 9
12%
Yes - Obligor climate risk scorecard
Yes - Adjustments to obligor rating methodology
No
Yes - Climate stress loss scenarios
36%
Yes - Other (1)
39%
21%
18%
Percentage of participants
SME Mid-Market Corporate
34%
21%
59%
21%
28%
54%
17%
39%
20%
22%
27%
21%
52%
39%
15%
CRE
1: E.g., Adjustments to obligor rating methodology and climate stress loss scenarios, but beyond 12 months. Bucketing of risks (geography, industry, property type segments).
N=33 N=29 N=41 N=35
Have you implemented or are planning to implement in the next 12 months any changes to the credit assessment/ adjudication and monitoring models to
capture the impact of climate change? (transition and physical risks)
C: > 50% of participants have implemented/or are planning to
implement climate stress loss analyses in mid-market, corporate,
or CRE space
Source: McKinsey/IACPM Survey on data and analytics innovations in Credit Portfolio Management – October 2021
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D: In the past 2 years, top investment areas have been data tech
and data acquisition – this trend is expected to continue over the
next 2 years
13
5
8
2
6
6
10
4
9
5
6
7
10
9
1
0
Data scientists and engineers
for development and validation
Data acquisitions
Data tech
(e.g. cloud, visualization)
11
Data scientists and engineers
for data quality processes
3rd Party/Vendor models
0
0
Other, please specify 1
25
22
22
20
3rd largest
Largest 2nd largest
15
7
4
2
5
1
9
6
6
8
5
5
7
11
10
1
1
0
20
29
21
0
20
11
Where have you made the most investments in the past 2 years and where do you expect to
invest the most in the coming 2 years?
In the past 2 years, the top
investment areas for participants
were data tech and data
acquisition
And this trend in expected to
continue over the next 2 years
with higher expected investment
Other top investment areas
include talent for both
development/ validation and
data processing
Number of votes Expectation for the next 2 years
In the past 2 years
Source: McKinsey/IACPM Survey on data and analytics innovations in Credit Portfolio Management – October 2021
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E: Machine learning models are primarily gaining traction for Risk
Scoring of SMEs and Early Warning across the board
Early warning indicators
Credit pricing
39%
Risk score/ Rating/
PD model
Stress Testing
IFRS 9/ CECL
44%
44%
39%
32%
37%
68%
24%
56%
46%
7%
10%
5%
29%
5%
12%
2%
0%
0%
0%
0%
0%
5%
0%
0%
Simulation-based
models (e.g.,
monte-carlo
approaches to
economic capital)
Statistical
approaches (e.g.,
linear or logistic
regression or
CHAID)
Machine learning
tree algorithms
(e.g. random
forest, gradient
boosting)
Expert based
qualitative
models
Other machine
learning models
(e.g. support
vector, NLP,
neural network)
44%
Stress Testing
Risk score/ Rating/
PD model
Early warning indicators
41%
Credit pricing 47%
IFRS 9/ CECL 44%
38%
66%
72%
56%
53%
38%
6%
9%
3%
6%
28% 0%
13%
16%
6%
3%
0%
0%
0%
3%
3%
Corpo-
rate
SME
What methodologies are being “used in production”, “validated” or “in pilot” for each of the listed use cases
for the Corporate and SME portfolio
Expert based and statistical
models are most widely applied
approaches across the
spectrum of use cases
Simulation based models are
more widely used for stress
testing
Machine learning models are
getting traction for Risk Scoring,
Early Warning, and Pricing
Percentage
Innovative data sources
Source: McKinsey/IACPM Survey on data and analytics innovations in Credit Portfolio Management – October 2021
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E: Innovative external data sources are more used for Corporate segment
while SME segment uses more innovative internal data sources
Which of the following categories of data are being used in production, under pilot or under
consideration for credit risk management use cases within the Corporate portfolio?
External data sources:
For Corporates, over 50% of the
participants are using, piloting or
considering New media or social
media and 3rd
Party account data, a
higher proportion than for SMEs
Both segments use E-commerce data
at similar rates
Internal data sources:
For Corporates, over 70% of the
participants are using, piloting or
considering Automated client/ issuer
financials and internal credit behavior
data, while for the SME segment in
addition to above 2, internal cross
product data also has large share
External
data
sources
Internal
data
sources
97%
88%
76%
59%
53%
33%
32%
88%
76%
62%
56%
44%
Economic and market forecasts
Credit bureau and rating agency data
Financial market data on issuers
News media or social media
Other high frequency data
3rd Party account data
Automated client / issuer financials
E-commerce data
Internal credit behavior data
Internal cross product behavior
Internal client interaction data
Internal consumer-wholesale crossover data
91%
63%
35%
32%
30%
29%
19%
83%
91%
76%
45%
38%
Corporate SME
Percentage
Innovative data sources
Source: McKinsey/IACPM Survey on data and analytics innovations in Credit Portfolio Management – October 2021
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F. Automated decisions are largely a feature of SME portfolios
SME
18%
18%
16%
34%
19%
11%
72%
8%
4%
Mid-market
87%
13%
Corporate
89%
11%
CRE
None and Not implemented
Less than 10%
11-30%
31-50%
Above 50%
Percentage of participants, where applicable
N= 27 25 31 27
Fully automated decisions for a
material portion of the portfolio
is almost exclusively a feature
of SME portfolios
However, there are pockets of
portfolio with full automation,
even for mid-market and others
Key insights
In the past 3-5 years, what was the typical percentage of automated decisions based on models
in your portfolio?
Source: McKinsey/IACPM Survey on data and analytics innovations in Credit Portfolio Management – October 2021
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14. McKinsey & Company 14
F: Where implemented, use of innovative data and/or advanced
analytics typically achieved increased automation
80
20
60
0
10
40
70
50
30
0
14
70
4
7
9
5
37
22 11
23
0
Mid-market
7
0
7
SME CRE
9
Corporate
5
26 27
36
In terms of increasing automation, what benefit have you seen in the past 3-5 years from the
use of innovative data and/or advanced analytics?
63% participants reported an
increase in automation for the
SME segment, followed by Mid-
Market (27%), Corporate (19%)
and CRE segment (14%)
Where implemented, use of
innovative data and/or advanced
analytics typically improved
automation by up to 10%
Higher improvement (11-50%) in
automation is typically observed
in SME segment, which involves
the highest level of direct
automated decisioning
Increased by 11-50%
Implemented but no uplift in automation
Increased by up to 10% Increased by more than 50%
70% 36% 26% 27%
XX%
% of participants
implemented
Percentage of participants that implemented
Source: McKinsey/IACPM Survey on data and analytics innovations in Credit Portfolio Management – October 2021
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F: Where implemented, use of innovative data and/or advanced
analytics significantly improved turn-around-time “TAT” for SMEs
10
40
60
50
70
20
30
0
7
9
12
0
41
3
7
19
30
Mid-market
SME
20
28
30
12
0
Corporate
10
0
13
CRE
63
52
44
56% participants reported
decrease in TAT for the SME
segment, followed by Mid-
Market (43%), CRE (32%), and
Corporate (31%)
Where implemented, use of
innovative data and/or advanced
analytics typically improved turn-
around-time “TAT” by up to 10%
Higher improvement (11-50%) in
TAT is typically observed in SME
segment but also to some extent
in Mid-Market and CRE
segment
In terms of accelerating TAT to decision, what benefit have you seen in the past 3-5 years from
the use of innovative data and/or advanced analytics?
Decreased by 11-50%
Implemented but no reduction in approval time
Decreased by upto 10% Decreased by more than 50%
63% 52% 41% 44%
Percentage of participants that implemented
XX%
% of participants
implemented
Source: McKinsey/IACPM Survey on data and analytics innovations in Credit Portfolio Management – October 2021
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16. McKinsey & Company 16
Agenda
Summary of survey results 20 mins
Perspectives on selected topics 30 mins
Questions 10 mins
17. McKinsey & Company 17
Perspectives on specific topics : Climate Risk, Next generation data
and analytics, and Scenario planning and forecasting
Climate Risk Next generation data and analytics Scenario Planning and Forecasting
Using cross-product data with help from
AI/ML can drive both revenue growth and
automated credit decision
For larger obligors, availability of analytics
and accessible data is key for turnaround
time reduction, however, doing so requires
treating data quality as more than a
‘regulator-required’ effort
Setting up a modular, portfolio specific
methodology for scenario analyses is
critical, prioritization will depend on
exposure to high-risk sectors
Climate risk impact on portfolio requires
inter-disciplinary skills and mobilization
across credit, front-line, and model risk
management
Building a flexible infrastructure to forecast
and optimize portfolio is more critical than
ever
Rather than waiting for a full-scale solution,
banks would want to establish analytics and
organizational capabilities that enable rapid
‘what-if’ analyses
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18. McKinsey & Company 18
Key learnings on the materiality of Climate Risk on Credit, based on
our extensive work with banks
The majority of the risk is in
knock-on impacts that most
banks do not model
Direct damages are immaterial on credit; Knock-on effects can dwarf direct impacts, e.g., 4.5x the impact
of direct 1st order impact for a Muni flood example
Material risk drivers include community deterioration, geographic transition risk, and broader ecosystem
impacts (e.g., insurance cost and availability)
Real estate losses are driven by asset pricing (property values and cap rates), not physical damage
Risk is concentrated in
“pockets” across the
portfolio; banks need to take
a targeted approach
Both physical and transition risk lie in very targeted areas of the portfolio: for example, for a large global
bank we identified that approximately ~15% of their loan book was materially exposed to climate risk
Banks need to perform heatmapping to focus their efforts on the high risk portfolios and risks: even within a
CRE portfolio for a large US bank, we found that majority of the credit impact came from 10% of the portfolio
C
urrent
SVA
(estimated)
O
il
and
Gas
C
ommercial
Real
Estate
A
griculture
M
anufacturing
E
xpected
2030
SVA
M
ining
~700
T
ransportation
U
tilities
R
esidential
~1100 -35%
Impact on Economic profit1, CAD mn
1. Calculated as the return on invested equity above the return on equity (estimated at 10.2% based on McKinsey CPAnalytics) times invested equity
(allocation based on exposure). Assumes that percentage NII decline = percentage net income decline
Climate is not a “capital”
problem; however it can
have real impact on returns /
economic profit
A ‘CCAR mindset’ of focusing on capital risks will underestimate the business value risk and miss the
opportunity to steer the business
For a North American bank, we identified that 35% of economic profits could erode by 2030 without taking
action on key pockets of climate risk exposures
The “average” impact is
moderate in the near-term,
but there is high degree of
counterparty-level variability
We found that even for high risk industries, the average impact is moderate: For example, in a portfolio of
upstream O&G companies, the impact by 2025 under below 2C scenario was ~7% median impact on EBITDA
However, the difference between winners and losers is stark: in the upstream O&G example, we saw
several counterparties with up to ~40% impact on EBITDA, while there were other companies that saw a
positive EBITDA impact
Climate Risk
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19. McKinsey & Company 19
Scenario analyses for corporate and mid-market obligors needs to
be sector-specific: oil and gas example
Module Specific Data
Carbon cost
Upstream Oil &
Gas
Acute impact
Competition
module
Stage 2 profit
revenue, cost
Integration
module
Physical risk
impact
Transition risk
impact Climate-stress
obligor
financials
Supply Chain Oil
& Gas
Cleantech
Scenario selection (e.g. NGFS Scenarios)
Scenario expansion and country downscaling (e.g., damage curve, transition pathways)
i
ii
iii
iv
v
vi
vii
Obligor Financials
Oil and Gas Asset-
Level Data
Clean Tech Market
Shares
Obligor Emissions
Abatement Cost Curves
Methodology isolates individual aspects of scenario analysis through modules that calculate Oil and Gas obligor impacts from:
Ÿ Oil and Gas demand changes across Upstream and Downstream Operations
Ÿ Clean Technology demand changes
Ÿ Carbon Costs
Ÿ Acute Physical Hazard damage costs
Climate Risk
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20. McKinsey & Company 20
Physical risk impact Revenue impact Carbon cost impact
Sanitized example : Demand destruction, direct carbon cost, and
market impacts for a specific obligor
Driven by current
business composition,
breakeven cost, and oil
and gas price
Driven by carbon emissions which
drives carbon costs, abatement and
ability to pass cost to customers/
market impacts
Demand
destruction
Market
impacts
Current
valuation
7%
Adaptation
Physical
impact
3%
40%
0%
Demand
creation
50%
Direct
carbon costs
5%
Abatement
30%
Full impact
100%
41%
Delayed transition scenario – 2050
Valuation impact waterfall – average impacts weighted by exposure Takeaway
• Demand destruction, direct
carbon cost and market
impacts are the top 3 drivers
of the climate impact to the
O&G portfolio
• Demand destruction is
related to the business
composition and
breakeven cost
• Direct carbon cost is
related to the carbon price
and the amount of output
that can be sustained
• Market impact is related to
the ability to pass cost to
customers and gain
market share from other
players
ASSUMING NO MANAGEMENT/BANK ACTION
Climate Risk
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21. McKinsey & Company 21
Sanitized example: Portfolio level impact for a sample of public oil
and gas obligors
200
1,300
40
300
65
1,700
800
35
25 70
15 30
1,100
400
20
600
45
700
500
50 55
900
1,000
60
1,600
1,200
0
100
1,500
1,400
Cimarex Energy Co.
Exxon Mobil Corporation
Total SE
Petrobras
Scope 1 CO2eq per $M total revenue
Breakeven Oil Price (USD/bbl)
Seven Generations Energy Ltd.
Woodside Petroleum Ltd
BP p.l.c.
Aker BP ASA
Antero Resources Corporation
APA Corporation
Equinor ASA
Conocophillips
Marathon Oil Corporation
Santos Limited
Suncor Energy Inc.
Canadian Natural Resources Limited
Chevron Corporation
Cnx Resources Corporation
Eog Resources, Inc.
OMV Ag
Pdc Energy, Inc.
Pioneer Natural Resources Company
Royal Dutch Shell Plc
500
25
300
600
20
15 70
40
30
800
35 50
900
1,000
400
1,100
45
1,200
1,300
55
1,400
60 65
1,500
0
700
100
200
1,600
1,700
Total SE
Scope 1 CO2eq per $M total revenue
Exxon Mobil Corporation
Antero Resources Corporation
BP p.l.c.
Marathon Oil Corporation
Equinor ASA
Aker BP ASA
Woodside Petroleum Ltd
Suncor Energy Inc.
Cnx Resources Corporation
Canadian Natural Resources Limited
Royal Dutch Shell Plc
Chevron Corporation
Pioneer Natural Resources Company
APA Corporation
Santos Limited
Eog Resources, Inc.
Cimarex Energy Co.
OMV Ag
Pdc Energy, Inc.
Petrobras
Seven Generations Energy Ltd.
Breakeven Oil Price (USD/bbl)
Conocophillips
Impact of each driver on earnings for upstream companies
Bubble size: Market cap 100% of current market cap
2030: Immediate transition scenario 2050: Delayed transition scenario
A B
Note: Scenario analysis assumes no mitigation action by bank or borrowers; Source: McKinsey Energy Insights, Rystad
Earnings increase
Earnings decrease 51-100%
Earnings decrease <=50%
Climate Risk
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22. McKinsey & Company 22
Case study: Using a phased framework to develop bespoke scenario
impact assessment tool for CRE portfolios (1/2)
Impact to Net Operating Income Mechanism to translate financials to
expected loss
Identify risks and specify scenarios Assess impact on obligor’s financials Quantify portfolio impact
Identify hazards
Ÿ Flood, hurricane and
wildfire most important,
given the bank’s
footprint
Ÿ Transition risk leading
to GVA impact in
counties with high
fossil-fuel dependency
Downscale scenarios
Ÿ Hurricane wind severity
in every mile across
areas where storms
have been observed
Ÿ Probability of flood and
inundation levels
Additional drivers of credit
worthiness
Ÿ Community and infrastructure
resilience or vulnerability
Ÿ Additional sponsor risk
Ÿ Risk mitigants like levees
Impact to Property Value
Ÿ Decline in property value due to
change in expected impact of
climate events
Ÿ Uninsured damage from physical
risk event
Ÿ Short term revenue decrease due
to business interruption
Ÿ Increase in insurance cost due to
increase in frequency and severity
of physical risk
Ÿ NOI and property valuation impact Loan-
to-value and DSCR of properties,
translated into PD, LGD and EL
Ÿ Detailed sensitivity testing, e.g.:
— Change in cap rate
— Insurance unavailability for specific
hazard like fire, or in a specific state
Climate Risk
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Case study: Using a phased framework to develop bespoke scenario
impact assessment tool for CRE portfolios (2/2)
Sanitized example from US based CRE portfolio of a large bank #1
100
140
2040
9
2030
Current
23
8
2050 Total relative
EL by 2050
Climate impact to EL arranged by deciles
70%
40%
10%
0
20% 60%
0.2
50%
30% 80% 90% 100%
Ø 4.6 0
43.0
1.6 0.6 0.3 0.1 0.1 0
Average
indexed
increase
in EL
100
334
125
72
Total relative
EL by 2050
37
Current 2030 2040 2050
3 2 3
10
5
4
2
Florida
0
1
Ohio
5
New York
1
14
9
California
5
0 1
Uninsured damage
Increase in insurance cost
Uninsured business interruption
Reduced demand for properties
exposed to climate risk
Transition risk & Heat stress
Net Cash Flow decline by transmission channel
With insurance
Without insurance
Evolution of climate shocked Expected Loss
Scenario : Delayed Transition
Evolution of climate shocked Expected Loss
Scenario : Delayed Transition
EL increase by year (starting EL indexed to 100)
Climate Risk
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24. McKinsey & Company 24
Deposits data can be used to create an up-to-the-minute estimate of
SMB’s financials
Strategic implications
Risk signals extracted from transactions
Estimated revenues and profits
Business seasonality
Sectoral dependencies
SME financial
position
Multi-banking clients
Loans with other lenders
Interest rate changes by other
lenders
Fintech relationships
(e.g. Paypal)
Competitive
information
Deposits transactions can be analyzed
using a transaction classifier to derive
an estimate of
Ÿ SMB’s financials (e.g. revenues,
revenue growth, and profits)
Using a reinforcement learning and
natural language processing, deposits
transactions are analyzed to provide
structure to unstructured data
In a client application, this method yield
95% transaction classification
accuracy and over 300 risk signals and
competitive indicators, resulting in
substantial improvement in predictive
power of credit risk models
Competition to become the
primary bank will intensify
In turn, banks that host the
deposit account where the
payroll is deposited have a
competitive advantage
Deposit accounts are already
increasingly being bundled
with other financial products
Fees for deposit accounts are
expected to reduce further
Context
Next generation data analytics
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25. McKinsey & Company 25
Case example: Leveraging transaction data to transform
credit decisioning
Up to 40%
Accuracy of financial
inflows and outflows
from classifier
95%
Predictive risk signals
– linked to
transaction
classifications
>300
Traditional lending process
More sophisticated understanding
of risks
More customer insights
More predictive power
Reimagined credit decisioning
additional predictive
power in some
subsegments
Illustrative; Client example
Customer provides bank account and
provides simple historic financial
statements
ETB: Transactional data from own
system, used to build synthetic
financial statements
Customer completes credit
application form
Customer completes online application
(pre-populated, leveraging API enabled
data sources)
NTB: Customer provides permission1
to access bank transactions data to
build synthetic financial statements
RM manually reviews data and
performs credit assessment (scoring
model, uses credit bureau, and
historic/ narrow financial data)
Algorithm integrates data and performs
credit assessment (e.g., leveraging
transaction classier to build financial
statements, link to risk signals)
Manual decision communicated to
customer
Decision communicated to customer
(instant time yes)
Next generation data analytics
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26. McKinsey & Company 26
AI4DQ
An AI-driven asset deployment driven approach can accelerate data
quality improvement significantly
1 AI toolkit for data 2 Deployment accelerators 3 Training modules
Detection: Ready to implement
package to assess data quality
Correction: Relationship discovery
and anomaly detection to find errors
Repair: AI driven correction through
an open-loop process
Deployable as pipelines that can be
stand-alone for immediate results
and integrated into Data Platforms to
continuously monitor and improve
data quality (e.g., Apache Airflow
integration with Collibra), platform
agnostic deployment
A new way of working, including
roles, talent, an a fast-paced Agile
operating model
Co-development of solutions through
build-operate-transfer to sustain the
impact
When implemented
together these 3
components significantly
accelerate data quality
capabilities
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AI driven data quality
27. McKinsey & Company 27
Data Quality can be addressed through modularized tools in three
core areas
Detection Correction Repair
How machine
learning helps
Automatic generation of reports on the profile
of data, inferred relationships between tables
and anomalies, root cause identification to
prioritize upstream interventions
Rule-mining and clustering algorithms
recommend corrections to data quality errors,
quantify confidence, and help estimate
business impact
Validate corrections with experts (open-loop)
confirming only lower confidence
recommendations manually and automated
approval of validated changes
Illustration
Detect top 1th percentile interest rate,
unusually late maturity date as a potential
error
Correct loan type with attribution, country of
origination, and address with 95% confidence
Flag and automatically fix reporting dates that
were corrected by experts repeated
Objectives Measure the quality of each record on a
scale of Low, Medium, High data quality to
help prioritize remediation
Recommend corrections to data quality
errors prioritized by business impact and
measure the confidence (e.g., 95%)
Validate recommendations with experts
and incorporate changes into underlying data
systems feeding reports
Ready-to-
deploy tools
Root cause identification Comparison to 3rd party data
Data relationship discovery Automated DQ rule generation Collaborative workflows
Anomality detection
Entity disconnect identification Free-form text corrections Programmatic data validation
Corrections that integrate attribute,
record, and database signals
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AI driven data quality
28. McKinsey & Company 28
High impact examples AI being used to improve data quality
Automated
identification of errors
in CRE loan data
Root cause detection
and correction to
errors in 5M customer
accounts
Accelerating an
enterprise data
transformation with AI
Corrected 5M free-form
occupations to accelerate
AML Customer Risk Rating
using a neural language
model and traditional fuzzy
matching
Automated data quality detection
and correction with AI (human-in-
the-loop) to reduce data
transformation timeline by 30-40
percent
Automated detection of data
quality errors in over 100,000
loans using time series anomaly
detection to detect issues in real
time and prioritize remediation
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AI driven data quality
29. McKinsey & Company 29
Scenario planning forecasting approach needs to be tailored to
bank’s footprint flexible to incorporate different driving factors
Full estimates from business drivers
and optimize across BUs
Interest Income
Credit Loss
…
Canada
UK
US
B2
B1
B3
A3
A1
B4
A4
A2
B5
Scenarios from underlying reasons
…
Canada
UK
US
Illustrative
Develop inflation scenarios based on set of
underlying reasons (e.g., supply chain
bottleneck leading to ‘cost-push’ inflation) and
consider incorporation of important macro-
linkages (e.g., currency fluctuation risk)
Business drivers from scenarios
Identify drivers that are likely to be inflation-
sensitive for business portfolios / geographies,
and direction of impact – e.g., inflation may drive
up transaction volume in the short term;
however, inflation may also reduce demand in
the long term
Develop analytics to project the underlying
drivers and the business portfolio financials
Based on projection results, synthesize
implications for strategic decision-making
Scenario Planning and Forecasting
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30. McKinsey & Company 30
Uncertainty in economic path require a forecasting approach that is
nimble, flexible, and responsive to emerging risks like inflation
Ÿ Model and analytics developed for relevant
drivers and separately for relevant geography
Ÿ Models capture time trend, macroeconomic
factors, seasonality and latent portfolio factors
in a transparent manner
Ÿ Designed to capture, test and visualize
business actions under different macro-
conditions
Ÿ Structured to generate report on portfolio and
sub-segment level with different ‘what-if’
Ÿ Flexibility to expand current internal scenarios
with new variables
Ÿ Ability to add macro and event driven overlays
Ÿ Ability to refresh scenarios weekly vs. monthly
Versatility
Coherence
Flexibility
Scenario Generation and Refinement
Customized scenarios for portfolio/segments
Ÿ Can be macro-economic or event driven
Ÿ Recent macro-trends (e.g., EPOP ratio) core to design
Business driver forecast through models
Volume, Revenue, and Expense Forecast Models tied to business
drivers (e.g., line utilization) and scenario conditioned
Implementation Engine
One-click solution for aggregation, reporting and visualization
Scenario Planning and Forecasting
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31. McKinsey & Company 31
In addition to standard capital or liquidity constraints, exploring
emissions related constraints can help in portfolio alignment
Capital consumption
Carbon emission
Preliminary list of constraints incorporated in the
approach (to be refined based on observations
during design phase)
Product Industry
Carbon
limit
Capital
limit
Approach to incorporate emissions related constraints
BU
Example output by industry at a loan level
Carbon consumption
Economic return
Energy Materials Telecom
Capital
Risk Weighted Assets
Expected Loss
Origination/balance growth
Liquidity coverage ratio
Emissions
Ÿ Include carbon limit based on benchmark scenario
at North America with relevant downscaling to
Canada/Alberta
Ÿ Add constraint for net zero target of total portfolio
emissions
Ÿ Develop functionality to add sector specific targets
and connect with potential sector-specific carbon
intensity metric
Loans out Loans in
Scenario Planning and Forecasting
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Microsegment based forecast models are coded in engine with a
Balance Sheet Optimizer added for ongoing scenario planning
Node 2
Node n
Node 1 Node 1 O/P
Node 2 O/P
Scenario File
Input
internal data
Config File
Overlay File
.
.
.
.
.
.
Node n O/P
Input Pre-processing (e.g., Python)
Run pre-processing code in Python
e.g., overlays, variable transformation
Prepare input
files and data
Data
aggregation
and Optimizer
Aggregation
Aggregate
predictions,
conduct sensitivity
Cashflow Engine
Cashflow calculator
(e.g., Spark)
Run microsegment
level calculations
Strategic
planning
FP & A
Add-on modules
Feed output to
additional modules
per specific use case
Client mgmt.
Architecture
tailored based
on level of
manual
intervention
desired, and
size of input
data
Example forecasting engine architecture for volume and revenue estimation
Scenario Planning and Forecasting
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Content Summary of survey results 20 mins
Perspectives on selected topics 30 mins
Questions 10 mins
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Questions
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