Putting risk and finance theory into practice


The theory is all well and good but there needs to be a balance between the full long-term risk and finance architecture and the need to fulfil immovable deadlines imposed by the regulators or by new customer demands. As such, banks are having to combine the strategic with the tactical, while trying to ensure that the latter is in keeping with the former. In particular, the final data warehouse/data mart architecture is something that will evolve within most organisations over time while in parallel they seek to put in place the other prerequisites. This trend could be seen in many selection processes. Initial selections for Basel II were often focused on credit rating models, followed by collateral management and risk weighting assessment calculators as banks came to understand the fuller picture. In many banks, the effort to build the definitive data


architecture is at an early stage and, even where banks have selected partners – typically the likes of Oracle, SAP and IBM – the projects are multi-year so there may be nothing in place for some time. Even back in early 2005, Accenture financial services partner, Maged Fanous, observed, in relation to banks’ data warehouse projects, ‘The time to start should have been much earlier’. Since then, there has been a succession of selection decisions for data warehouse components, but with plenty of other banks still at different stages of planning and selection even today. Although building a resource which is ultimately intended to be generic, ABSA Bank allowed its priorities to be driven by Basel II because this had been the most pressing issue. Historically, the bank – in common with most others – went for a tactical approach to each compliance requirement, so ended up with the typical silo type infrastructure. Once the urgent requirements had been satisfied with its central repository, the challenge was to migrate the silo solutions into this resource. For instance, it had a separate piece of software for reporting to the South African Reserve Bank on deposits; the bank wanted this reporting to be done from the repository. Decisions about which other areas of compliance would use the repository would come down to the attributes and needs of each. Jaco van Wyk said that, as a rule of thumb, ‘everything that has to balance back will come via the repository’. It was felt that an area such as anti-money laundering did not have this requirement. New requirements, such as a National Credit Law, would be supported from the repository. A single, consistent source of data can be used not only for


reporting and compliance but also for solid business activities such as performance management, improved credit scoring, customer segmentation, relationship management, and better control and management of the bank as a whole. Phil Chamberlain at Bank of New York Mellon, reflected: ‘There is not a single bank that is saying, this is a wonderful chance


178


to spend money. So we are looking for business benefits wherever we can.’ Addressing the need for a single, consistent view of the business, backed up by a well-implemented data model, should benefit the business as a whole. The perceived business benefits from data cleansing and consolidation have already been described, in relation to the efforts of Daiwa Securities SMBC, among others. So too the management control and reporting gains and the tangible business benefits that stem from linking the revised data to day-to-day decision-making. It all means the business should become driven by much more accurate, timely information. It might also allow faster onboarding of customers and improved speed-to-market for products (as was hoped at Daiwa Securities SMBC). Such benefits may not always be easy to measure but are likely to outweigh the considerable investment where the projects successfully achieve their original goals. There may also be benefits from a rationalisation of


infrastructure. The removal of point-to-point interfaces and adoption of an ETL layer should be an advantage, as ABSA showed in its plans to apply its ETL layer to both its compliance and business warehouses. At NordLB Luxembourg, there was the belief that a bank that implements IFRS requirements in financial accounting should be able to eliminate old systems for local reporting, as the harmonisation of national and international accounting standards duly occurs. So there should be a cost-saving benefit. In addition, having passed the IFRS hurdle, the bank started to turn its attention to its internal reporting and started to define the data for this. Head of finance, Christian Veit, believed the IFRS project had ‘led to increased flexibility with regard to the integration of existing or new systems as well as to leaner technical infrastructures and simplification and unification of the data set’. At Rand Merchant Bank, the approach has been a phased


one. There had been hold-ups and organisational issues between the siloes and business units, but a first phase was scheduled for September 2009. This was for equities, with subsequent areas of business moved into the new architecture every two or three months. Equities seemed to be a sensible starting point, Snyman felt, in part because the volumes and complexity were not too prohibitive and because it had ‘really poor processes’ built around other systems and quick fixes so it was not far off a ‘green field’ implementation. Also key was the fact that, perhaps for these reasons, this business unit was keen to be at the forefront. If such projects fail at the first hurdle, then it is very difficult for them to recover, he pointed out. So having a receptive business was a big advantage. Interesting, the bank also looked to its supplier, Oracle, for ‘industry best practice’. If it had taken practices from its own


Risk Management Systems & Suppliers Report | www.ibsintelligence.com


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82  |  Page 83  |  Page 84  |  Page 85  |  Page 86  |  Page 87  |  Page 88  |  Page 89  |  Page 90  |  Page 91  |  Page 92  |  Page 93  |  Page 94  |  Page 95  |  Page 96  |  Page 97  |  Page 98  |  Page 99  |  Page 100  |  Page 101  |  Page 102  |  Page 103  |  Page 104  |  Page 105  |  Page 106  |  Page 107  |  Page 108  |  Page 109  |  Page 110  |  Page 111  |  Page 112  |  Page 113  |  Page 114  |  Page 115  |  Page 116  |  Page 117  |  Page 118  |  Page 119  |  Page 120  |  Page 121  |  Page 122  |  Page 123  |  Page 124  |  Page 125  |  Page 126  |  Page 127  |  Page 128  |  Page 129  |  Page 130  |  Page 131  |  Page 132  |  Page 133  |  Page 134  |  Page 135  |  Page 136  |  Page 137  |  Page 138  |  Page 139  |  Page 140  |  Page 141  |  Page 142  |  Page 143  |  Page 144  |  Page 145  |  Page 146  |  Page 147  |  Page 148  |  Page 149  |  Page 150  |  Page 151  |  Page 152  |  Page 153  |  Page 154  |  Page 155  |  Page 156  |  Page 157  |  Page 158  |  Page 159  |  Page 160  |  Page 161  |  Page 162  |  Page 163  |  Page 164  |  Page 165  |  Page 166  |  Page 167  |  Page 168  |  Page 169  |  Page 170  |  Page 171  |  Page 172  |  Page 173  |  Page 174  |  Page 175  |  Page 176  |  Page 177  |  Page 178  |  Page 179  |  Page 180  |  Page 181  |  Page 182  |  Page 183  |  Page 184  |  Page 185  |  Page 186  |  Page 187  |  Page 188  |  Page 189  |  Page 190  |  Page 191  |  Page 192