InformationStrategyThispresentationisandsolelyintendedfortheclienttowhomitisaddressedProjectObjectivesandOverviewOpportunitiesforImprovementSystemAcquisitionStrategySAPGLProjectUpdateNextStepsAGENDAProjectObjectivesandOverview(BusinessVisionandStrategy)ThesinglelargestprovideroffundstoindustryThepremiermarketmakerofRMB-linkedsyntheticsecuritiesandderivativesintheworldThebestprovideroffinancialservicestocorporatesinallthestandardproducts-marketswithinIndiaAdominantproprietarytraderinselectproducts/marketsOneofthetopthreeprovidersofpersonalfinancialservicesinthecountryProviderofplexproductswithstructuredcashflows&embeddedoptionsYouhavesharedwithusyourvisionofbing......andhowtheselinkinwithyourbusinessimperativesBusinessVisionThesinglelargestprovideroffundstotheindustryThebestprovideroffinancialservicestocorporatesinallthestandardisedproduct-marketswithinIndiaBusinessImperatives(inorderofpriority)BusinessStrategyOfferinnovativeproductsandahighdegreeofflexibilityinstructuringthetermsofstandardsproductsFocussedclientgroupsformedincludingclientrelationshipgrouptofacilitatecross-sellingManagebusinessriskthrough:diversificationofassetprofileimproveALMandcreditriskmanagementsystemuseofRAPMframeworkforallocationofcapitalGroup-wideALMwithanintegratedbudgetingandplanningfunctionalityincluding‘what-if’analysisAbilitytosupportmultipletransferpricingsystemwiththeabilitytoputeOASAbilitytovarystandardproductparametersIntegratedfront-officeacrossallproductsandclientexposuremanagementacrossgroupUp-to-dateinformationonclient,productandbusinessunitlevelprofitabilitytosupporton-the-spotpricingMultipleGAAPbasedfinancialaccountingonagroup-widebasisPortfoliocreditanalysisAbilitytoofferplexproductsAutomatedworkflowmanagementCont./...Continued...BusinessVisionPremiermarket-makerofRMBlinkedsyntheticsecuritiesandderivativesintheworldBusinessStrategyPositioningoftheyieldcurveasthebenchmarkyieldcurveandslowmovementawayfromgranularandviscousbenchmarkssuchasSTPR,MTPRandLTPRNewproductdevelopmentfocusingonbuildingblocksaswellasstructuredproductsTightintegrationbetweenlendingandtreasuryfunctionincludingmonsoftwareplatformtofacilitateriskmanagementandrapidroll-outCont./BusinessImperatives(inorderofpriority)...Continued...BusinessVisionSignificantproprietarypositiontakinginselectproductmarketsBusinessStrategymondealingroomforgrouppaniesHighspeeddealcaptureandmonfront-officesoftwareforallgrouppaniesFullyintegratedriskmanagementsystemtotrackVARlimitsSignificantimprovementsinefficiencyandspeedofdeliverythroughbetterback-officesystemswithstraightthroughprocessingBusinessImperatives(inorderofpriority)Awellarticulatedstrategysteersanorganisationtowardsitsobjective...Detailthebusinessvisionandstrategyinmorespecific,measurableterms(includingdefinitionofkeysuccessmetrics)Definenear-term,interimvisionDevelopaprehensivebusinesscaseframeworkforassessingrelevant,prioritisedbusinessimperativesovernearandmid-termAclearbusinessarchitecturederivespetitiveadvantagefromtheenablinginformationtechnologyarchitectureneedstodetailthebusinessvisionandstrategy...To-datevisionandstrategyinclude:Largestprovideroffunds‘Best’providerofstandardisedproductsProductinnovationandflexibilityTargetedmarketsegmentationandcross-sellingEnablingriskmanagementandRAPMImplicationsneedtobethoughtout,forexample:Whatisthetargetmarketshare?Whatgrowthrates,numberofclientsandtypeofclientarerequiredtoachieve‘largest’and‘best’?Howmanyyearswillthistake?Whatimplicationdoesthishaveforexposuregrowth(byriskbucket)relativetogrowthinoverallrisk?‘Buying’marketshareraisesrisksmorerapidlySpecific,measurablemetricsneedtobedefinedBusinessVision/StrategyThebroadervisionassessmentshoulddefineaninterimbusinessobjective/structure...Whatistheinterimplanninghorizon(between‘where-we-want-to-go’and‘where-we-are-today’)WhataretheorganisationalchangesrequiredtoachievethisgoalWhataretheregulatoryconstraintsWhatdoestheinterimgoalimplyfor:portfoliosizeandexposuregrowthrequiredcapitalandrisk-adjustedreturnsloanlossesandoverallriskWhataretherefore,theinterimbusinessimperatives?InterimVisionThebusinesscaseframeworkneedstobeconsiderednotjustintermsof...Marketshare MarketpositioningEfficiency PerformanceRisk...butalsoTradingvolumes SkilledresourcesCulturalappetite ChangemanagementCosts ValueinthemarketBusinessCaseFrameworkAclearlydefinedbusinessstrategywillenableKPMGtodevelopasuccessfulITstrategy...UnderstandingofRequirementsGapAnalysisFunctionalSpecificationITArchitectureOptionsSystemEvaluation&SelectionITStrategy&RolloutImpt.PlanQuickWinsCurrentStatus4Dec(Phase1)Benefitsto20Feb199925June1999Timescales18Dec(Phase2)29Jan(Phase2)13Feb199915June1999Quickfeedbackonchangespletenessofinformationinvolvementcritical?...whichisthefocusofthisProjectAbbreviation:TREA=TreasuryLEND=LendingDW=DataWarehouseF/O=FrontOfficeB/O=BackOfficeAtthisstage,yourbusinessimperativessuggesttheneedforasophisticatedandintegratedbusinessapplicationarchitecture...ITArchitectureTheITarchitectureshouldbeareflectionofthebusinessdrivers...ITArchitectureAnalyticsProcessOrganisationBusinessStrategyITArchitectureWithoutthesebusinessdrivers,theperceivedITcostsmayseemhigherthanthebenefits...NetBenefitstoTime‘Fire’approach‘Ready,aim,&fire’approachVVITInvestmentSomeexamplesofestimatedsystemcostsformajorapplicationsFrompastexperiencescoveringfrontandbackofficesystemestimated

implementationcostsforinternationalfinancialinstitutionsforonesiteapproximatelyrangebetween:Treasuryfrontofficesystem,5to10millionUSDpersystemTreasurycashbackofficesystem,10to20millionUSDpersystemLendingfrontandbackofficesystem,15to30millionUSDPayment/matching/nettingsystem,1to5millionUSDpersystemDealing/Credittools,0.5to5millionUSDpersystemIntegrationhub(excludingdatawarehouse),2to10millionUSDITInvestmentAroughestimateoftotalcostsbasedonasophisticatedandintegratedarchitectureis...FX/MMfrontoffice,estimatedcost10millionUSDCapitalmarketfrontoffice,estimatedcost10millionUSDDerivativefrontandbackoffice,estimatedcost30millionUSDTreasurycashbackofficesystem,estimatedcost20millionUSDLendingfrontandbackoffice,estimatedcost30millionUSDDealingandcredittools,10millionUSDPayment/matching/nettingsystems,15millionUSDIntegrationhub(excludingdatawarehouse),10millionUSDAssumingallmajorsystemsarereplacedtomeettheimperativeswecouldhaveasystemsshoppinglistforthetopoftherangesystemscovering:Theestimatedtotalcostfortheabovelistis135millionUSD,excludinginfrastructure,webbasedsystems,disasterrecoverypackageanddealingroomcosts.ITInvestmentAssumptionswehavemadeincalculatingthesecostsare...Initialsoftwarecost/license,30%to40%oftotalHardwarecosts,10%to20%oftotal(excludesinfrastructure)Implementationcost,theremainderdependsverymuchontheabovepointsITInvestmentProjectObjectivesandOverviewOpportunitiesforImprovementSystemAcquisitionStrategySAPGLProjectUpdateNextStepsAGENDAWefollowedaholisticapproachinconductingthegapanalysis...RiskManagementPerformanceMeasurementStrategyOrganisationAnalyticsProcessGroupEntityImplicationsofouroverallgapanalysisatthegrouplevelare:StrategyOrganisationReportingAgroup-widestrategyforriskmanagementneedstobedefined:riskphilosophyandappetiteriskprofileacrossentitiesinthenewstructureofMCG,GCG,PFScapitalallocationandperformancemeasurementpolicyAgroupwideorganisationneedstobeformed:definitionsofriskmanagementrolesandresponsibilitiesplansforgroupwideriskmanagementmonitorandreviewsgroupwideriskperformanceAgroupwidetechnologyenabledmechanismforaggregateriskandperformancereportingneedstobeestablishedriskaggregationguidelinesanddetaileddatadefinitionsystemsarchitectureconsolidatedriskandperformancereportingformatsAparisonofthecurrentregulatoryreportingscenariowithbestpracticesis...BestPracticeTimelysubmissionandaccuratepreparationofallregulatoryreportsbyacentraliseddepartmentthatisadequatelystaffedAsIsAlthoughreportsareregularlysubmittedtheentireprocessisdecentralisedie.therespectivesettlement/mid-office/back-officedepartmentisresponsibleforcollatingthedataandpreparingregulatoryreportsAutomatedprocessofgeneratingregulatoryreportsMajorityofthereportsarepreparedmanuallyRegulatoryReportingRegulatoryreportingisonlyalimitedprocesswithintheoverallpliancefunction...BestPracticesonpliancefunctionAcentralisedpliancefunctionforthegroupwiththeHeadofpliancereportingdirectlytotheCEO/MDPreparingaGroup-wideplianceManualincorporatingtheregulatoryenvironment,applicabilityofvariousstatutes,policiesandproceduresrelatingtoplianceProactivemanagementofregulatorycapitalrequirementpliancetosign-offonallnewproductstobeintroducedProactivemonitoringofcustomerplaintsAnticipatelikelychangesinregulationswhichmightactagainsttheinterestofthegroup/entityinitscurrentbusinessNotifytheregulatorsofanybreachesandtheactionstakentorectifytheerrorassoonaspossibleRegulatoryReportingBasedonthebestpractices,ourrmendationsonregulatoryreporting/pliance...Establishagroup-widepliancedepartmentanddefineitsrolesandresponsibilitiesSeniormanagementtosubmitapliancecertificateateveryBoardofDirectorsmeetingCentraliseregulatoryreportingwithineachentityandifpossible,withintheGroupAutomatetheproductionprocessofthereportsRegulatoryReportingProjectObjectivesandOverviewOpportunitiesforImprovement(Lending)SystemAcquisitionStrategySAPGLProjectUpdateNextStepsAGENDACharacterisationofdistinctriskmanagementaccountabilitiesthatincludes:planningmonitoringandreportinganalyticsprocesses/systemsArticulationoftheroleofcreditriskfunctionthataddresses:creditapprovalcreditpolicyproblemloanmanagementportfoliomanagementcreditreviewThe‘BestPractice’model/frameworkforcreditriskmanagementincorporatesstrategy,organisation,...Clearstatementofthe:overallrisktolerancecreditstrategyproductsmarketscustomerscreditriskpolicyriskprofilesriskaggregationhierarchyriskreviewfornewproductintroductionlimitstructurebasisofcapitalallocationandcapital-at-riskcalculationsStrategyRiskManagementFrameworkOrganisation…analyticsandprocess/informationrequirementsWelldefinedworkflowsandactivitiesthatincorporateindependentcontrolsresponsibilitiessystemssupportandfunctionalityProcess/InformationRequirementAppropriateanalyticalmodelsthatmeasuredefault/LIEDriskadjustedvalueportfoliovalue-at-riskAnalyticsRiskManagementFrameworkTheriskstrategyprovidesthebasisforbuildingtheriskmanagementframeworkOpportunitiesforImprovementAs-Is/To-BeRisktoleranceThereislimitedevidenceof:definitionoftheriskappetiteortheriskphilosophyaconsolidatedcreditstrategyriskprofilingofproductsaggregationhierarchyinthecontextofthenewstructureofMCG,GCGandPFSriskreviewprocessinnewproductintroductiondocumentedguidelinesforcapitalallocation.CreditstrategyCreditriskpolicyCapitalallocationTheriskappetiteneedstobespecifiedin‘capitalatrisk’termsbasedonthetargetrating/confidencelevel.TheBoardofDirectors’riskphilosophyneedstobemunicatedacrosstheorganisationAconsolidatedlendingpolicyneedstobepreparedandmunicatedtothelendingunitsCreditriskpolicyneedstobedefinedthatspecifiestheriskaggregationhierarchyinthecontextofthenewstructureKeyelementsRiskManagement(Strategy)TheriskorganisationprovidesindependentriskoversightOpportunitiesforImprovementAs-Is/To-BeRiskmanagementfunctionCreditriskfunctionTheresponsibilitiesoftheriskmanagementfunction(e.g.independentriskoversight,measurementstandards,limits,riskreporting)needtobeclearlyarticulatedTheroleoftheBoardinriskmanagement(e.g.understandtheriskstheorganisationisexposedtoandensurepliancewithRBIrequirements)Theroleofthecreditriskfunction(e.g.creditriskexposuremeasurementstandards,limits,portfolioperformance,aggregationandreportingofcreditrisk,approveratings,etc.)needstobeclearlyspeltoutThereisnogroup-wideorganisationforriskmanagementThereislimitedevidenceof:documentationoftherolesoftheriskmanagementfunctionalthoughRiskManagementDepartmenthasbeenestablishedinI-Ltd.definitionoftheroleoftheBoardofDirectorsinriskmanagementdocumentationoftheroleoftheCreditRiskGroupwithintheRMD.HowevertheRMDhasaroleinapprovalofcreditratingsanddevelopmentofmodelsidentificationanddescriptionofportfoliomonitoringresponsibilityKeyelementsRiskManagement(Organisation)Summary:ThisdiagramprovidesanoutlineofthefourprincipalroleswithintheRiskManagementmiddleofficestructurealongwithasummaryofthemainresponsibilitiesrequiredofeachrole.1.RiskManagementPlanning2.RiskReporting&MonitoringBusinessanalysts3.RiskAnalyticsQuantitativeanalysts4.RiskSystemsSystemanalystsResponsiblefor:DefiningandreviewingriskmanagementproceduresandcontrolsDevelopinglimitstructuresandformulatinglimitproposalsEvaluatingriskmanagementimplicationsofnewbusiness/productsDefiningcrisisresponsemechanismResponsiblefor:DevelopingoverallrisksystemsstrategyPlanning,managingandco-ordinatingimplementationsystemsSupportingdaytodayriskreportingandmonitoringrequirementsResponsiblefor:DevelopingriskmeasurementmethodologiesformarketandcreditriskReviewingandenhancingexistingriskmodelsonaperiodicbasisConductingscenarioriskmeasuresanalysisandstresstestsResponsiblefor:MonitoringmarketandcreditriskexposuresagainstagreedlimitsSupportinginformationrequirementsofseniormanagementExampleof“BestPractice”RiskManagementMiddleOfficeResponsibilitiesBenefitFoundationformiddleofficeinfrastructureisdevelopedtoprovidethenecessaryriskinformationtosupportmanagementdecisionmakingRiskManagement(Organisation)KeyfunctionalresponsibilitiesoftheCreditDepartmentare...CreditApprovalCreditPolicyImpairedLoanManagementPortfolioManagementCreditReviewHeadofCredit

ReviewandapprovalofcreditsubmissionsPerformannualreviewsReviewloangradingAdviceonloanstructuringRmendnew/amendedpolicyasrequiredmunicatepolicyandprocedureguidelinesProposelimitstructuresOverseecredittrainingActasthesourceoftechnicalexpertiseManageimpairedloansSupervisecollectionsandrecoveryactionDevelopandmonitorearlywarningsystemforimpairedcreditsEstablishportfolioreportingrequirementsMonitorportfoliopositionReport/adviseontrendsPerformperiodicauditsEnsurepliancewithproceduresReviewofriskgradingRiskManagement(Organisation)TransactionandPortfolioManagementserveplementaryobjectivesTransactionmanagementpursuesvaluecreationPortfoliomanagementpursuesvaluepreservationRiskRatingDealPricingandStructuringPortfolioManagementRatingsandMigrationModelsRAPMValuationModelsVARModelsBenefitsEnablersRiskManagement(Analytics)TransactionandPortfolioManagementserveplementaryobjectivesTransactionmanagementpursuesvaluecreationPortfoliomanagementpursuesvaluepreservationRiskRatingDealPricingandStructuringPortfolioManagementRatingsandMigrationModelsRAPMValuationModelsVARModelsBenefitsEnablersPrimaryMetricsVARRiskadjustedvalueDefault/LIEDRiskManagement(Analytics)Bankriskratingsystemsneedsubstantialimprovement

0.0%1.0%2.0%3.0%4.0%12345EDRRiskGradeCurrentSystemsHaveTooFewGrades,OftenLittleSeparationorAccuracyTargetSystemWouldProvideMuchBetterDiscrimination,Separation,&Accuracy0.0%1.0%2.0%3.0%4.0%12345RiskGrade67891011EDRRiskManagement(Analytics)SuccessfullyCapturingEconomicBenefitsRequiresAccurateCreditRisk&CostMeasurement:ThreePossibilitiesNPV>0RAROC>HurdleRateNPV<0RAROC<HurdleRateNPV=0RAROC=HurdleRateExpectedLossesUnexpectedLossesUnexpectedLossesExpectedLossesOrigination/MonitoringCostsUnexpectedLossesExpectedLossesOrigination/MonitoringCostsMarketReferencePriceCostofFundsCapturingEconomicBenefitsSuccessfulrisk-adjustedpricinganalyticshelpdrivevaluecreationinmerciallendingOptionsCostsOptionsCostsOptionsCostsOrigination/MonitoringCostsRiskManagement(Analytics)Transactionrisk/rewardanalysis:Summarizing‘BestPractice’:NPVvs.RAROCTendstobepolicy-drivenTendstobetwo-stateCantreatcreditriskas

dynamicTendstotakeastaticviewofcreditriskCanbecalibratedtothemarketortointernalriskpremiumsTypicallydoesn’tvalueloanstructure&optionalityCantreatcreditriskmigrationsinamulti-stateframeworkCanvalueembeddedoptionality&loanstructureRAROC*NPV*Performancemeasurementesinmanyvariations--thesestatementsrefertothewaymosttransaction-levelRAROCmodelsareimplementedRiskManagement(Analytics)Implementingactiveportfoliomanagementisnoteasy...

Leadstotruerisk-reducingportfolioactions,e.g.,securitization,creditderivativesetc...RequiresaconsistentorganizationalvisionthatpromotesconcertedactionstepsRequiresrichdataandinformationalresourcesSpansmultipleorganizationsandfunctions;creditpolicy,financeandbusinessunitsRequirescreditVARanalyticsthatincorporatetherichnessoftransactionvaluation(loanstructure,embeddedoptionsetc.)RiskManagement(Analytics)Theriskanalyticsaddressriskrating,RAPMpricingandportfoliomanagementOpportunitiesforImprovementAs-Is/To-BeRiskRatingRAPMPricingKeyelementsRiskManagement(Analytics)PortfolioMgmt.Noportfolioanalytics(ie.VARmodel)LimitedcorrelationanalysistodateDevelopingtransactionRAPMNoanalysisofloanstructureorembeddedoptionsNeedtoexpandcorrelationandmarketanalysisInternallydevelopedcorporateloanriskrating(scorecard)WeightsneedstatisticalfoundationNeedfinerriskgradationNeedtoleveragebondratingdefaultmappingsRethinkriskratingmodelsExpandnumberofriskratingsincludingaddingmorecriticisedgradesAssessriskfactorsandtheirstatisticalfoundationAssessandpilotplementaryvendorsolutionsReassess(sensitivityanalysis)allRAPMparametersandconsidereconomicvalue(NPV)approachesAssessmarketbasedcreditriskinformationAssessopportunitiesforimprovementbyanalysingstructure&embeddedoptionsDevelopsnapshottestsdataforanalysingalternativeportfolioapproachesAssessandpilotsimplifiedVARapproachUndertakeformalisedcorrelationanalysiswithinthemarketplaceandforothersimilaremergingmarketeconomicsTheTransactionManagementphaseisavaluechainposedofninedistinctsteps...BusinessDevelopmentRiskAssessmentStructuringApprovalBooking/DisbursementRoutineAssessment&MonitoringRepaymentProcessingRecovery=CloselylinkedstepsDocumentationEachoftheseninestepsinclude:KeyElementsCriticalSuccessFactorsInformationRequirementsEnablersincludingtechnologyKeyPerformanceMeasuresRiskManagement(Process)InTransactionManagement,“BestPractices”sharesimilarattributesthatsupportprimarybusinessdecisionsACQUISITIONProcessisuniformandstandardizedAuthoritiesareappropriateconsideringrisk,plexity,andvolumesRemainresponsiveandflexibleClearstatementofriskacceptancecriteria(RAC)SuperiormarketknowledgeUnderstandcustomerneedsandalignwithbankservicesSuperiorsalesandrelationshipmanagementskillsAnin-depthappreciationofandabilitytoidentifyandanalyzeriskdriversDisciplinedcreditculturewithanupromisingmitmenttocreditqualitySuperioruseofriskassessmenttoolsClearunderstandingofloanpurposeandcorrelatingeventsUnderstandriskdriversandmitigatessuchRationalized,fully-costed,risk-basedpricingmethodologiesAttributesStructuringBusinessDevelopmentRiskAssessmentApprovalRiskManagement(Process)InTransactionManagement,“BestPractices”sharesimilarattributes(continued)...MAINTENANCEACQUISITIONIntegrityandpletenessthereofAccuratelyreflectsagreementbetweenbankandcustomerHighlyautomated,standardized,yetflexibleKnowledgeablemanagementandstaffSegregatedfromlineSpecializedskillsetsBusinessdrivenwithlegalsupportWelldefinedstrategiestomaximizevalueTransfertoandfromclearlydefinedWellestablishedfeedbackloopDataisaccurate,plete,andreliableProcess&informationflowsareautomated&seamlessIsresponsiveEffective/efficientcontrolsStandardsclearlydefinedincreditpolicyFiltersensuremonitoringoccursFrequencyisclearlydefined&riskdrivenInformationisadequatelyanalyzedReceipt&actionsaretimelyAccurate,plete,andreliableAutomated,integrated,andflexibleApplication&reportingistimelyandavailableAttributesRoutineAssessment&MonitoringBooking/DisbursementRepaymentProcessingDocumentationRecoveryRiskManagement(Process)SuccessfulBusinessDevelopmenteffortsaredrivenbystrategicgoalsandresultfromanalysisandplanningBestPracticePrinciplesKeyElementsProvidetacticalguidelinesforforacceptablecredits/risksMarketknowledgeandsegmentationUnderstandcustomerneedsandalignwithproductsandservicesEffectivelymarket,develop,andmanagerelationshipsBusinessdevelopmentatNotformallytiedtoCreditStrategy/PlanorPolicyExistingcustomerfocusRespondstonewcustomersLimitedcustomerstrategy/planningLimitedmemorializationofeffortsI-Ltd.hasinitiatedeffortstoenhancetheprocessBusinessdevelopmenteffortsshouldinclude:StartwithBankCreditStrategyTargets&limitsRiskAcceptanceCriteria(RAC)Develop/refinemarketanalysis&salesplanExisting&prospectivecustomersCustomerstrategyProfitability&balancedgoalsOn-goingmanagement-managingthe‘Pipeline’Promptlymemorializeefforts-datacaptureReview&refineRiskManagement(Process)SuperiorskillsintheRiskAssessment&Structuring

phasesarekeydeterminantsofabank’ssuccessBestPracticePrinciplesKeyElements-RiskAssessmentAbilitytoidentify,understand,andevaluateriskdriversCreditqualityfocusDisciplinedcreditcultureRiskAssessment&StructuringatGenerally,riskassessmentandstructuringappearssatisfactory;however,ourreviewwaslimitedFinancialanalysissoftwareintegratedinICISRLoanpricingsystemsareinplaceandbeingrefinedBasedonKPMG’sexperience,typicalissuesinclude:PurposeandsourcesofrepaymentFinancialanalysisSupportingsoftwareBalancesheetvs.cashflowCashflow-understanding&definitions‘Elevator’analysisHistoricalnotprospectiveStructuredoesn’tcorrespondtopurposeConditions/covenantsarepolarized;notmonitoredForeignexchangeanalysisUnsecuredlendingPricing-risk/reward;fullycostedKeyElements-StructuringUnderstandpurposeoftheloanIdentifysourcesofrepaymentUnderstandcustomerriskprofileAll-inpricingRiskManagement(Process)AsuccessfulApprovalprocessistimelyandclearlycorrespondstoguidingstrategiesandpoliciesBestPracticePrinciplesKeyElementsUniformityandstandardizationofcreditappraisalandapprovalprocessAppropriatelevelsofauthorityBalancedwithmarketdemandsTheApprovalprocessatis:ConcentratedatmitteelevelinI-Ltd.DelegatedtoindividualsatI-BankRiskManagementisnotavotingmemberatI-Ltd.ThereisnoRiskManagementdepartmentatI-BankGenerally,riskassessmentandstructuringappearssatisfactory;however,ourreviewwaslimitedTheApprovalprocessshouldconsider:AppropriatedelegationofauthorityPolicy&controlsTraining&certificationVolumes-70%to75%oftransactionsTimedevotedtomitteesvs.otherresponsibilitiesAdequatereview-deliveryofcreditappraisalsRoleofRiskManagementDepartmentVotingmembershipVetoincasesofpolicyexceptionsIndependence/Balance/ControlRiskManagement(Process)pletedocumentationdefinesthelender/borroweragreementandmayultimatelydeterminecollectabilityBestPracticePrinciplesKeyElementsIntegrityandpletenessofdocumentationAccuratelyreflectagreementbetweenborrowerandcustomerStandardized,yetFlexibleKnowledgeablemanagementandstaffSystemintegrationTheDocumentationprocessatis:AtI-Ltd.,loandocumentsare:PreparedbyloanofficersandattorneysGeneratedfromstand-aloneputersystemsFrequentlyipleteresultingindevelopmentofCASAtI-Bank,loandocumentsare:PreparedbydocumentationpersonsandattorneysTypicallypre-printedwithblanksfilledinTheDocumentationprocessshouldconsider:Missingcontrolelements-IndependentreviewAnalyzeactivitiesandprocess:Minimumskillset&delegationDocumentationareaFreeattorneysforothertasks&reducecostsSystemfunctionalityandintegrationDramaticallyreducedatare-entryIncreaseaccuracyReducecostsRiskManagement(Process)Disbursementandrepaymentprocessesmustbe

efficient,accurate,andprovideadequatecontrolsBestPracticePrinciplesKeyElements-Booking/DisbursementReliable,accurate,andpleteEffectiveworkflowwithintegrationandverificationofdatasourcesResponsiveKeyElements-Repayment/BillingReliable,accurate,andpleteTimelinessTheDisbursement/repaymentprocessat:Di