The RWA Risk team is about to wrap up the first cycle of collateral evaluations for Maker. In this first cycle, the team has worked on both DROP (CF & NS) and Trust Model (6s) assets. This is a brand new experiment for Maker where the team, with the help of partners and other internal domain teams, is creating evaluation frameworks, processes and internal intelligence from scratch to deliver on the RWA promise. It feels like our mission statement is “to build an investment bank in a couple of months”.
To make sure we fulfill our mission and move as fast as we can without compromising on quality of work, the team is adopting an iterative approach and constant feedback loops. In a nutshell, we are adopting some agile practices in Risk management. This is not very common.
In the interest of keeping our communication channels open to the community, we have done our first round of “Lessons Learnt” retro, midway between risk assessment publications/discussions and setting up of monitoring tools for RWA assets. Our goal was to review where our work felt efficient and solid (i.e. good foundations to keep building); and the areas where we can improve a little or a lot.
There was no better way than to structure our review as a “The Three Little Pigs” story:
- Our “House of Bricks”: things we do that are solid and we should keep doing
- Our “House of Sticks”: things we do that are OKish, but can be improved
- Our “House of Straws”: things we do that just about hangs together, needs more attention
Once identified the core themes for each, the team “voted” on some areas we can take short term actions with incremental improvements that we think can bring benefits both to the community and to our own work with partners/other teams.
Obviously, we identified some solid areas, but also quite a few spots that require tightening the screws. We incorporated feedback from the community in forum discussions and from people directly involved in delivering this first piece of work.
Just a summary of a few common themes per “house” (non-exhaustive)
House of Bricks
- A very positive and professional mediation with asset originators
- The community engagement and contribution to risk assessments was great
- Valuation model approach took into account industry specific frameworks
House of Stacks
- Make the risk assessment reading experience easier to the community
- Provide a tailored content of the “essentials” to governance (“exec summary”)
- Include more visuals (e.g. infographics) in the assessments
- Include more visual summaries of “red flags”, “question marks” to the community
Processes & expectations
- Provide a clear workflow of interaction steps with asset originators
- Set as clear as possible expected timeframes with partners/support teams
House of Straws
Community experience & risk assessments:
- Give a voice to the community i.e. “tell us what is important for you in assessments”
- Highlight why some pieces of information are important to be included
- Risk assessments may be long and the community does not always read them
Focus areas for the coming cycle
The team is already working on some actions that will reflect in the coming round of evaluations and monitoring. Considering all improvement opportunities, our immediate focus are these top 4 actions:
- Include an Executive Summary in all our assessments
- Provide a workflow diagram for AO engagements
- Get feedback from community on “What does the community look into the risk assessment” [Pool]
- Make clear the monitoring process and valuation model in a forum post
We hope these actions will bring noticeable improvements to the community. We’ll continue iterating, improving and communicating.
Keen to hear from all of you.