BDO Specialised Valuations and credit Group
SVCG is a specialist team, with deep, technical specialist skills and proven practical experience in the areas of:
- financial instrument fair valuations (including derivatives and the XVAs),
- credit modelling (IFRS 9 ECL and unlisted credit fair valuation),
- market and credit risk management (including IBOR transition advisory),
- hedge accounting (IAS 39 and IFRS 9), and
- treasury function and process advisory services.
SVCG operates within BDO South Africa’s Financial Services business unit to provide consulting, audit support, assurance and internal audit co-sourcing services in these specialist areas.
SVCG is a team of over 30 people, including partners, managers and analysts. The team consists of quantitative analysts, Chartered Accountants, CFA Charterholders, actuaries and data scientists.
Our experience in the local and internationally financial markets enables us to provide the highest quality of deep technical support to our clients, but with an understanding of the practical valuations, credit and risk management principles and challenges.
SVCG’s service offering
SVCG is unique in its service offering as we combine quantitative valuations and credit modelling skillsets, with years of Financial Services (FS) accounting and auditing experience, enhanced with data science and data governance expertise for the extraction and analysis of all valuations and credit data.
This ensures an enhanced and integrated specialist service delivery and offering to our clients and other BDO network firms.
SVCG is set up to offer outsourced fair valuations, credit modelling and financial risk management services to any BDO network firm or corporate / institutional client, either as an audit or advisory specialist.
Our fair valuations services are digitally enabled by means of our B VAL fair valuations tool. BVAL enables our SVCG team to perform full portfolio fair valuations of our clients’ vanilla financial instruments, including unlisted debt, money market and derivative instruments.
SVCG’s credit modelling team showcases our digital transformation by means of our BDO Credit Risk Suite (CRS), enabling our team to provide an internally consistent risk-rating framework to produce independent probabilities of default (PD’s) for risk management, capital management, stress testing and IFRS 9 Expected Credit Loss (ECL) calculation purposes.
For a full overview of our entire service offering:
B VAL – PORTFOLIO FAIR VALUATION TOOL
B VAL is an exciting platform-based digital assurance solution from BDO South Africa’s Specialised Valuations and Credit Group. The solution forms part of BDO South Africa’s B Digital platform which contains a host of assurance-based technology solutions.
The B VAL 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. B VAL enables full portfolio fair value revaluations of thousands of instruments at the push of a button; to independently test the fair value of these instruments and provide maximum assurance, as opposed to traditional sample-based model and rates verification assurance techniques.
B VAL 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.
B VAL is safe, efficient and accredited
The B VAL tool allows large volumes of unlisted financial instruments to be re-valued on a portfolio basis, 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.
B VAL 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 B VAL further utilise independent market data, independently sourced by SVCG. This allows the tool to achieve a truly independent and objective valuation result, by utilising 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.
B VAL 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 solution.
Any instruments not categorised into either level 1 and 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.
B VAL, as part of our B Digital platform, represents another leap in our digital assurance transformation journey. B VAL is just one component of the full service offering of SVCG. For a full overview of our entire service offering, please refer to our Credentials Document:
Please contact Kevin Hoff or Matthew Lindsay for more details on B VAL, for your fair valuation assurance or consulting needs.