B.2.2 Risk Calculation for Customer E
Customer E is a Legal Entity (LE) (Other Organization). Therefore, the Legal Entity risk model will be used.
Note:
The Party-Party Relationship is specifically for those who are non-customers of the bank but are related to the primary customer who is being risk-scored.Figure B-1 Risk Score Calculations for Customer E
The following table shows the risk score calculations for customer E.
Table B-8 Risk Calculation for Customer E
| Parameter | Weight | Calculation or Verification Step | Calculation for Customer E |
|---|---|---|---|
| Geography Risk associated with Country of Headquarters | 7.5 | Risk as it appears on the Parameter Risk Score Jurisdiction tables for country geography risk. |
Customer E’s headquarter is in the US. Per Country Parameter Risk Score Jurisdiction table, US risk is 90 Customer B’s Country of Head Quarters (HQ) Geo Risk = 90. |
| Geography Risk associated with Countries of Operation | 7.5 | The maximum risk of countries in which the corporation conducts business. |
Customer E operates in Romania and the US. Per Country Parameter Risk Score Jurisdiction table, US risk is 50, Romania's risk is 100. Customer E’s Country of Operation Geo Risk = 100 |
| Watch List for Primary Customer | 20 |
If the customer is on a trust or exempt list (that is, a list with a risk <0), Watch List Risk --> 0 Else, (highest risk of the matched list x 10). |
Customer E appears on a PEP list and the risk level is 40 Customer E’s Watch List Match Risk = 40. |
| Watch List for Interested Parties | 10 |
For each customer (and non-customer) directly associated with the current customer (that is, through CUST_ACCT, CUST_CUST, or party_party_rlshp), calculate INTERESTED PARTIES WATCH LIST RISK as (highest risk of the matched list x 10) *For this parameter, calculate Maximum Interested Parties Watch List Risk). |
Customer G, P is on Watch List A, Watch List B, and Watch List C. Watch List A’s risk is 1. Watch List B’s risk is 2, Watch List C’s risk is 3 Watch List Match Risk = 30. |
| Industry | 15 | Risk as it appears on the Parameter Risk Score Jurisdiction tables for industry types. |
Customer E is in the Telecommunication s Industry. Per Industry Parameter Risk Score Jurisdiction table, Telecom. risk is 50. Customer B’s Industry Risk = 50. |
| Corporation Age | 5 |
0 - 12 months --> 80 13 - 36 months --> 60 37 - 120 months --> 40 More than 120 months --> 0 |
Customer E has been a customer since 36 months. Customer E’s Corporation Age Risk = 60. |
| Legal Structure & Ownership | 5 | Risk as it appears on the Parameter Risk Score Jurisdiction tables for legal structure types. |
Customer E is a Public Corporation. Based on Legal Structure & Ownership Parameter Risk Score Jurisdiction, Public Corporation Risk is 0. Customer B’s Legal Structure & Ownership Risk = 0. |
| Risk Associated with Account Type | 5 | Maximum Risk of all the accounts a customer has a controlling role on. |
Customer E has 2 accounts – Credit Card and Savings Account for which the score are 60 and 25 respectively. Customer E’s Account Type Risk is Maximum of (60,25). |
| Risk Associated with Method of Account Opening | 5 | Maximum Risk of all the accounts a customer has a controlling role on. |
Customer E has 2 accounts that have been opened via Online and Walk-in and the scores are 70 and 20 respectively. Customer E’s Method of Account Opening Risk is Maximum of (70,20). |
| Length of Relationship with the bank or FI | 10 |
0 - 12 months --> 80 13 - 36 months --> 60 37 - 120 months --> 40 More than 120 months --> 0. |
Customer E has been a Customer for 36 months. Customer E’s Length of Relationship with the bank or FI Risk = 60. |
Risk Score = Sum (value of the risk assessment parameter * weight in decimals) Final Risk Score = 46.25.
Sum of [(0*0.05)+(20*0.05)+(90*0.075)+(100*0.075)+(40*0.2)+(30*0.1)+(50*0.15)+ (40*0.05)+(0*0.05)+(60*0.05)+(70*0.05)+(40*0.1)]
Risk Category: Medium
Promoted to Case, even though the category is medium, as the Watch List Score is 40, which is above the threshold set.