Case study deutsche bank compas banking luxoft for risk management advisory
For more information about Luxoft, visitwww.luxoft.comwww.luxoft.com/financial-services/case study13.09.2012Luxoft Helps Risk Management Advisory(RMA) at Deutsche Bank Move in the RightDirection with COMPAS.ClientIn today’s turbulent economy, one of the major hazards faced bymost financial and non-financial institutions is the area of Credit Risk– that is the risk of debtors not repaying their financial obligations asagreed. A proactive management of these risks requires a serious andaccurate calculation of probabilities of default, future exposures andrecover expectations. At Deutsche Bank, Risk Management Advisory’s(RMA) primary objective is to professionally counsel other financialinstitutions on their risk management methodologies, procedures andsystems, helping them to achieve industry best practices and surpasschallenging regulatory requirements.RMA employs a team of 170 professionals with its head office inHamburg and hubs in Berlin, London, Istanbul, Hong Kong andSingapore. Designed by Deutsche Bank specialists with hundreds ofyears of combines hands-on lending and risk management experiencein diverse markets around the world, the Comprehensive ApprovalSystem (COMPAS) was built to effectively address the everydaychallenges in risk management and regulatory compliance facedby banks in assessing credit in their operating environments. As anexample, COMPAS possesses the ability to systemically assess (SME)borrowers who have limited or no financial statements in a mannerthat manages the risk while enhancing the role of the business areas.On the other end of the spectrum, COMPAS possesses the ability toeffectively analyze complete corporate groups.Outsourced Experts Assist With Crucial Loan Origination and CreditRisk Management Application, Enabling DB to Better Serve itsClients While Expanding Market Share.Risk ManagementAdvisory (RMA) deliverstailored solutions for thefull spectrum of riskmanagement and assetservicing requirementsof Deutsche Bank’sinternal and externalclients globally.01
ChallengeGiven the importance and integrated nature of the COMPAS toolwithin the Advisory package, Deutsche Bank executives selectedLuxoft as the software development“partner of choice”on theproject.Luxoft, an emerging global leader in application outsourcingservices, is engaged by the world’s leading financial institutionsto develop, deploy and maintain a broad range of systems,especially where commercially available products are unable tofully provide the needed functionality or where integration withthe existing systems need to take place. Luxoft applies its strongculture of innovation and software engineering excellencealong with its deep domain expertise to solve their clients’mostcomplex problems.Employing nearly 3000 people, Luxoft provides value to itsclients through exible delivery models, the worlds’best IT talentpool, low attrition rates, and the highest security and qualitystandards in the industry. Today, the Deutsche Bank LuxoftDevelopment Center develops and maintains the IT systems thatsupport the bank’s key business processes.Comprehensive Approval System(COMPAS)COMPAS is the advanced web-based lending tool, designed byDeutsche Bank to significantly increase the profitability of thelending products of banks and financial institutions. Automating,standardizing, and systematically managing the loan origination andcredit approval process helps mitigate the specific risks inherent inlending and delivers faster loan decisions, resulting in improved clientsatisfaction.COMPAS delivers x-rating system coverage and can be used as asingle point credit assessment and scoring model across a lendinginstitution, managing client segments ranging from large corporateborrowers to Mid-Cap and commercial accounts as well as retailcustomers.COMPAS modules comprise loan origination and workflowmanagement; collateral capture; generation of risk rating; customer,facility, and combined exposure ratings; group analysis functionality;as well as pre-defined and user-defined reporting. The key benefits ofCOMPAS are quantified in several ways:uu Reduced average turnaround time of a credituu Reduced number of man-hours spent on each new credituu Reduced credit and operational losses facilitated by a strategicproactive risk management platform.COMPAS is easy to implement and adopt because it takes advantageof the most advanced IT platforms and uses flexible databaseinterfaces combined with a web-based system solution with intuitivedesign and workow.02Luxoft - Case StudyDevelop and launchan enhanced web-based Loan Originationsystem that increasesprofitability of lendingproducts for financialinstitutions around theworld.SummaryThe Risk ManagementAdvisory (RMA) group atDeutsche Bank wantedto develop an innovativeLoan Originationsystem, which wouldinclude an automatedcredit decision engineand easily meet allinternational banking“best practices”.WhyLuxoftLuxoft was selected,based on the winningcombination of the rightskills and a proven trackrecord of success on otherDB projects.
FeaturesandFunc-tionalityofCOMPAS:03Luxoft - Case Studyuu Automated LoanOrigination &Approval Flowsuu Basel II Compliantuu Application Scoring &Client Risk Ratinguu Collateral Allocationuu Expected LossCalculationuu Business RulesProcessing andApplication DecisionGenerationuu Client GroupManagement andJoint Credit RiskAssessmentuu Portfolio Reportinguu Scoring Model Testing& Calibration Moduleuu Batch PortfolioScoring Module“It’s understood thatLuxoft involvementmakes our product morecompetitive on highlypopulated market of CreditManagement tools”,Wolfgang Topp, GlobalHead of RMA.COMPAS can run against any J2EE 1.5 compatible software / hardwareand will be completely tailored to the user needs. Web servicesinterface facilitates integration of COMPAS with the existing systemsused by the bank.The primary goals of COMPAS are:uu Automation and structuring of Loan Originationuu Risk Quantification (Score, Rating, Expected Loss)uu Approval processing and program based lendingCOMPAS was built inline with best enterprise practices resulting ina secure, stable & scalable system. Its architecture ensures COMPAScan be successfully deployed on wide range of client’s infrastructuresand be easily customized upon client’s request.SYSTEMPACKAGESLOAN ORIGINATION RATING KERNEL APPROVAL FRAMEWORKCALIBRATION UIREPORTINGBASICMODERATEPREMIUMFINANCIALSMANAGEMENTFINANCIALSMANAGEMENTADD-ONSPRICING DOCUMENTMANAGEMENTWEB SERVICESINTERFACINGDASH BOARDREPORTINGUSER ADMINISTRATIONUSER GROUPMANAGEMENTUSER SERVICESMANAGEMENTUSER ENTITLEMENTSMANAGEMENTSYSTEMSECURITY AUDIT TRIAL LOGGING MULTI LANGUAGE/ CURRENCYQUALITATIVEDATA CAPTURELOANS LIFECYCLEMANAGEMENTCOLLATERALSCAPTURE / TRACKINGGROUP MANAGEMENTQUANTITATIVE SORCEKNOCKOUT RULESEVALUATIONPD/CRF CALCULATIONCOLLATERALALLOCATIONEL/ERF/FRFCALCULATIONDECISION RULESEVALUATIONQUALITATIVE SORCEGROUP APPROVALAPPLICATION APPROVALBATCH SCORCINGMODEL CALIBRATIONPORTFOLIO REPORTINGPDF REPORTING
Tech-nologiesEmployed04Luxoft - Case Studyuu J2EEuu Apache Strutsuu Velocity Frameworkuu Springuu Hibernateuu Web ServicesProject ResultsBy partnering with Luxoft for the original development and ongoingsupport function, RMA was able to release a marketable version ofCOMPAS in less than six months. Communication was smooth and allquestions and issues were resolved quikly, making efficient use of the30-member team’s geographic spread across several time zones.Luxoft continues to go above and beyond in its support by takingpart in client sales presentations; providing documentation supportfor RFP responses; and serving as full IT project partner in all COMPASintegrations for third parties. Luxoft is also actively involved inCOMPAS marketing.“Luxoft team rose up to every challenge that this complex projecthad presented. They demonstrated both in-depth understanding ofrisk management best practice, our RMA business and the innovativeapproach we proposed. They designed with COMPAS a cutting edgetool that sets new benchmarks for an integrated risk rating and creditapproval engine Luxoft has won our full trust as a partner, and we lookforward to continuing our cooperation,”said Jan Gross, Global Head ofRisk Advisory Services at Deutsche Bank.Wolfgang Topp, Global Head of RMA at Deutsche Bank, added:“It’s understood that Luxoft’s involvement makes COMPAS morecompetitive on highly populated market of Credit Management tools.”