IBS Journal February 2015


‘Banks need to make decisions about how to blend


real-time processing with end-of-day.’ Mikael Sorboen, BNP Paribas


ing engine, then moved in file format into a reconciliation engine (around 90,000 jobs per day), and is then loaded into the three-day layer (it is only loaded into the second layer if there are any adjustments to be made). The bank has an event engine to trigger calculations as soon as possible, with data extracted, calculated and input back into the database. The platform supports 2000 users


in 40 sites, generating around 50,000 requests per day. There is an internal business intelligence layer, dubbed MRflex, which is described by Sorboen as a bespoke Java-based wrapper. In terms of what within this set-up


needs to be real-time, BNP Paribas has identified a number of areas, for compliance and control. These are pre-trade checks against counterparty limits; compliance with trading man- dates; detection and prevention of abnormal trading patterns; incremental initial margin requirements from central counterparties (CCPs); and control of market risk exposures per counterparty, net of collateral. ‘Banks need to make decisions about


how to blend real-time processing with end-of-day,’ says Sorboen. There are a lot of organisational challenges, including the need to synchronise trades and hedges. ‘It is not just adding a jet engine on the back of your current systems.’ It is a different architecture and there is a need to clarify who does what. His advice is that banks should seize this as an opportunity to simplify. He is doubtful that Sybase IQ will be able to cope with the real-time requirements so, among other options, the bank is evaluating


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SAP’s in-memory platform, HANA. Some of the new requirements


have thrown up opportunities for new and existing suppliers. An example of a relatively recent arrival has been Stratex- Systems, which has built a solution on top of Sharepoint that is intended to ensure that risk strategies are adhered to. One of the two initial development partners was UK-based Skipton Building Society’s mort- gage processing subsidiary, Homeloan Mortgages (HML). There was previously the typical scenario of two or three people responsible for risk management, which ticked the boxes but was not part of how HML did business, says StratexSystems CEO and founder, Andrew Smart. The change since then is reflected in the fact that there are around 700 users of the StratexSystems solution at HML. ActiveRisk and Hitec with its Poli-


cyHub are in a similar space, seeking to bridge the gap between the theory and the enterprise. At the other end of the scale from the specialists is IBM, which claims to have invested $24 billion in the last ten years in building up its big data and analytics capabilities (mainly acquisitions) plus $7 billion in organic investment. Among the components that now underpin IBM’s solutions are the Algorithmics-derived Algo platform, OpenPages for governance, risk and compliance, Cognos for reporting, the QRadar Security Intelligence Platform, and Trusteer for fraud prevention. When Macdonald moved with Algo-


rithmics to IBM, it was like being ‘a kid in a sweet [candy] shop’, with many applica- tions and services that can be brought to bear to solve problems, far beyond the


© IBS Intelligence 2015 www.ibsintelligence.com


capabilities of Algorithmics on its own. This includes the 90,000 people in global services. It also includes software such as the human resources suite from IBM company, Kenexa (acquired in 2012) to manage whether staff have read and understood risk-related training and rules. Also in the mix is IBM’s Watson cognitive technology, which is being applied to a couple of areas of financial services (wealth management, with DBS in Singapore as a user in this domain, and risk management). Watson ‘isn’t just churning out numbers, it is helping to do a job with expert advice’, says Macdonald. It can sift through masses of data to come up with answers to actual questions, such as ‘what would be the impact of a fall in the price of gold on this portfolio’, looking at all of the historical data and research to do so. ‘The scope is much, much larger


than, say, two years ago,’ says Macdonald. The majority of banks are still taking tactical decisions because of the ‘deluge’ but increasingly with a view to a more strategic approach. This is along the lines of, ‘not only what solves my problem today but how can we benefit from the broader investment and where can we go next after we’ve solved today’s issue’. If you were building an architecture


to support all of this, then you wouldn’t start where most banks reside today. The siloed data and the disconnect between the risk systems and the business users are major hurdles. The amount of technology and investment that is being thrown at the challenge is huge but then so too are the losses, fines and wider consequences of getting it wrong.


analysis: risk management


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