BVAL is an exciting platform-based digital assurance solution from BDO South Africa’s Specialised valuations and credit group.

The BVAL tool has digitised the valuation process for unlisted fixed income and vanilla derivative financial instruments from the planning process to the final delivery of a valuation report. BVAL enables full portfolio fair value revaluations of thousands of instruments at the push of a button, independently testing the fair value of these instruments and providing maximum assurance, as opposed to traditional sample-based model and rates verification assurance techniques.

BVAL was designed to simplify the valuation process by automating the fair valuation models for various unlisted financial instruments commonly held by financial institutions. These financial instruments include various money market instruments, such as floating and fixed rate notes, unlisted deposits and discount notes, as well as derivatives such as interest rate swaps, contracts for difference, forward exchange contracts, currency swaps and vanilla options.

BVAL is safe, efficient and accredited

The BVAL tool allows large volumes of unlisted financial instruments to be re-valued on a portfolio basis and in an efficient and effective manner, without the user having to tediously re-create / tailor each valuation model.

The risk of error in running valuations has also been reduced, as all valuation models are locked and inputs go through a central validation process. The user is able to spend more time analysing and understanding valuation differences identified, rather than on model calibration and input verification.

BVAL has been fully accredited by BDO South Africa’s audit technology tool committee, which provides oversight and reviews for all digital audit tools within the business. The committee is responsible for ensuring that all audit technology tools deployed across the assurance and advisory businesses comply with International Standards on Auditing, technology security and operational best practices, and the relevant risk frameworks for BDO globally.

Inputs and data

Over and above the automated valuation models, the tool standardises the data requirements for each valuation model. This simplifies the valuation process by allowing the user to know exactly what data is required, in order to successfully run the valuation models, reducing unnecessary data requests.

The valuation models in BVAL further utilise independent market data, independently sourced by SVCG. This allows the tool to achieve a truly independent and objective valuation result, by using factual, static data and pairing this with independent valuation models and related market inputs sourced from observable and recognised sources.

The SVCG has standardised the data input requirements into templates per instrument, to facilitate the easy and quick sourcing of data and reducing the data cleansing process. In addition, the SVCG has data scientists embedded into the team to assist our clients with extracting data and inputs directly from their databases, should standard data reports not be available from their systems.

Level 1, 2 and 3 pricing at large-scale volumes

SVCG performed level 1 instrument / listed repricing through the use of our financial data licence with Refinitiv Eikon, also known as Thomson Reuters. We have pricing templates setup and staff trained on the use of the platform to pull relevant pricing data, last traded information, volumes traded, countries of issue, exchange rates and any other financial data, as required.

BVAL is principally used for level 2 instrument pricing on a large-scale portfolio basis, using independently sourced and observable market data inputs. Our BDO Credit Risk Suite (CRS) software tool may also be used to price unlisted credit to be incorporated into level 2 fair value pricing, including CVA. It leverages the IFRS 9 ECL inputs into a hazard rate model. Please contact us for more information on our BDO CRS tools and solutions.

Any instruments not categorized into either level 1 or level 2 are considered to be level 3 instruments. These are generally complex instruments required to be evaluated on a more bespoke basis, however, are often held in low quantities. We utilise the actuarial modelling specialists within SVCG, as well as our corporate finance team, to appropriately evaluate and report on these instruments, across the unlisted debt, equity and exotic derivative spectrum.

BVAL represents another leap in our digital assurance transformation journey. BVAL is just one component of the full service offering of SVCG. 

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