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  • 1. Financial Risk ManagementIn a SAAS Model © 2012 IBM Corporation
  • 2. Transparent simulation frameworkERM Risk Management System Results Portfolios Mapping Scenarios Simulation Products Security CUSIP Price Curr USD JAPAN-164(10 YEAR ISSUE) JGB 4.1 12/22/03 GG7174376 101.64 JPY 0.92 JAPAN GOVT COUPON STRIPS JGBS 0 12/20/21 EC8297581 77.83 JPY 0.70 JAPAN- 12(3 YEAR DISC) JDGB 0 09/20/05 EC6650773 99.75 JPY 0.90 CANARY WHARF FIN II PLC CANWHA 0 01/24/22 EC3985388 100.00 EUR 115.80 YORKSHIRE BUILDING SOC YBS 0 01/15/04 EC0873579 100.00 GBP 166.38 PACIFIC LIFE FUNDING LLC PACLIF 5.153 07/15/09 EC0076942 107.35 NLG 56.42 YAHOO! INC 984332106 20.00 USD 20.00 US TREASURY N/B T 1 1/2 07/31/05 912828BE9 99.92 USD 99.92 US TREASURY N/B T 1 1/8 06/30/05 912828BC3 99.23 USD 99.23 US TREASURY N/B T 3 02/15/08 912828AT7 100.59 USD 100.59 TYCO INTERNATIONAL LTD TYC 6 3/8 01/15/04 902120AF1 85.00 USD 85.00 RGS (AEGCO) FUNDING CO AEP 9.81 12/07/21 74955DAA9 133.36 USD 133.36 PRIVATE EXPORT FUNDING PEFCO 5.73 01/15/04 742651CK6 103.89 USD 103.89 PAINE WEBBER GROUP INC UBS 0 03/15/05 69563AKU4 100.00 USD 100.00 GOVT TRUST CERT GTC 7.33 05/15/06 383751AA2 100.00 USD 100.00 GOVERNMENT EXPRT GOVEXP 6 03/15/05 383731AE6 104.40 USD 104.40 GTE NORTH INC VZ 6 01/15/04 362337AD9 103.64 USD 103.64 COCA-COLA ENTERPRISES CCE 8 1/2 02/01/22 191219AP9 130.44 USD 130.44 CITIZENS COMMUNICATIONS CZN 7.45 01/15/04 177342AH5 101.80 USD 101.80 CANADA GENERIC STRIP CANCDS 0 12/01/21 13508ZYV8 34.22 CAD 25.46 BERKLEY (WR) CORPORATION BER 8.7 01/01/22 084423AC6 112.05 USD 112.05 Valuation Risk Factors Models 6% 5% ƒ{x, y} 4% 3% 2% 1% 0% 0 2 4 6 8 10 12 14 16 18 20 © 2011 IBM Corporation
  • 3. Infrastructure, Platform and Software © 2011 IBM Corporation
  • 4. Extensive coverageSome Challenges Facing In-House ERM solutions  Implementation – Hardware environments (Dev, Test, Prod, DR) – Configuration – Technical Training – Migration to environments – Automation / Integration – Connectivity to data sources – Additional 3rd Party licenses (e.g. Oracle)  Production – Daily monitoring – Problem Solving – New Features and requirements – Upgrades – Scalability & Performance © 2011 IBM Corporation
  • 5. Extensive coverageSoftware As A Service “Building up software operations to meet sudden increases in volumes or support new business opportunities is often a challenge for financial institutions and their installed systems. SAAS hands the challenge over to the suppliers of the service” - Clive Davidson – Risk Magazine April 2011 © 2011 IBM Corporation
  • 6. Extensive coverageWhy Software As A Service ?? – Avoid hardware costs (Purchase & maintenance). – Focus on financial institution’s specifics – DATA is key!! – Monitoring is NOT your problem. – Benefit from new features / regulatory requirements without upgrades – Extensive functionality coverage (e.g. Models / Reports) – Shared data is provided and validated (e.g. F/X rates) – Quicker Implementation time – Cost effective! © 2011 IBM Corporation
  • 7. Infrastructure, Platform and Software as Service © 2011 IBM Corporation
  • 8. A scalable and extensible architectureFunctional architecture Management Front office Risk Group Reporting Hierarchies What-if Open API Engine 2 Engine 1 Scenarios Risk factors T&C’s © 2011 IBM Corporation
  • 9. Challenges with SAAS  Reliance on 3rd party  Security  Transparency  Customization9 © 2011 IBM Corporation
  • 10. Extensive coverageOvercome the obstacles: Hosted vs. Service  Service  Common data  New Features benefits  Community / Social  Hosted  Customization  Security  Scalability & Transparency © 2011 IBM Corporation
  • 11. Extensive coverageBT Pension Scheme Management (BTPSM) “allowed us to avoid the big data oversight function that many in-house developments require” - Wyn Francis, Head of Investment Risk at BTPSM ($55 billion under management) © 2011 IBM Corporation
  • 12. Hosted Environments Business lines Scenarios Fin Engineering Risk Control Mgt Reporting Algo Risk Service © 2011 IBM Corporation
  • 13. SAAS model with 3rd Party Market Data © 2011 IBM Corporation
  • 14. Risk Reports Market data Instrument data Holdings data Client 1 Scenarios Simulation Client 2 Client 3 © 2011 IBM Corporation
  • 15. Extensive coverageCloud Computing Two recent reports by IBM suggest that interest in clouds is genuine, and growing. In its 2010 Global Chief Information Officer Study, IBM asked more than 3,000 CIOs what was on their short list of visionary plans. 60% of respondents indicated cloud computing. © 2011 IBM Corporation
  • 16. What is a Cloud ? © 2011 IBM Corporation
  • 17. What Is Virtualization? © 2011 IBM Corporation
  • 18. Extensive coverageCloud Computing “Hosted Clouds offer a balance of lower cost implications and security controls. The trade off is that availability and support tends to be under negotiated service level agreements” - Neil Bartlett, CTO Algorithmics, an IBM Company TH!NK Magazine, November 2011 © 2011 IBM Corporation
  • 19. Extensive coverageWho does this fit? Smaller Financial Institutions Insurance Companies Asset Managers Fund Managers Specific requirements (e.g. CVA) © 2011 IBM Corporation
  • 20. Thank You For Your Time Contact Information: Mark Jacobs mark.jacobs@il.ibm.com Senior Director, Risk Analytics, Israel +972 (3) 918 8350 © 2011 IBM Corporation