1. BANKS PROFITABILITY MANAGEMENT
OFSAA
MARIO MRLJIĆ NEOS 15.4.2010

2. AGENDA
• INTRODUCTION
• BANK PROFITABILITY
• OFSAA
• IMPLEMENTATION
• Q&A
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3. NEOS
• FOUNDED 2002.
• LONG TERM EXPIRIENCE ON PROJECTS WITH MID-SIZED AND LARGE
CUSTOMERS
• ORACLE CERTIFIED PARTNER
• LOCAL PARTNERS – S&T
• CERTIFIED CONSULTANTS
CONSULTANCY SERVICES
BUSINESS INTELLIGENCE
APPLICATION DEVELOPMENT
(BI i DW)
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4. CUSTOMERS/EXPIRIENCE
• AZFOND (OBVEZNI I DOBROVOLJNI FONDOVI)
• ALLIANZ TYRIAK (MIROVINSKI FOND RUMUNJSKA)
• COCA COLA BEVERAGES HRVATSKA D.O.O.
• CROATIA OSIGURANJE D.D.
• FIMA VRIJEDNOSNICE D.O.O.
• HEP
• HNZ
• HYPO LEASING
• HZZO
• IGH
• MAKEDONSKI TELEKOM
• PBZ D.D.
• SITRONICS TELECOM SOLUTIONS (PRAGUE)
• TEKSTILPROMET D.D.
• VABA BANKA D.D.
• ZABA D.D
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5. BANK PROFITABILITY
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6. BANK PROFITABILITY - HR
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7. BANK PROFITABILITY - HR
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8. BANK PROFITABILITY
• DRIVERS
– DELIVER ACTIONABLE CUSTOMER, BUSINESS LINE, AND PRODUCT
PROFITABILITY INSIGHT
– HAVE MORE GRANULAR AND DETAIL INSIGHT IN KEY PROFITABLITY
COMPONENTS
– INCORPORATE RISK INTO DECISION MAKING
– ABILITY TO ACT ON TIME
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9. ORACLE FINANCIAL SERVICES ANALYTICAL
APPLICATIONS
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10. GOAL ENVIRONMENT
INPUTS FINANCIAL PERFORMANCE RISK OUTPUTS
Accounting Financial
Accounting Control Consolidation Legal & Regulatory
Reporting
General
Ledger Strategy Operational
Balance Sheet Reporting
Planning
Core
Transactional Planning
Systems
Management
Data Reporting
Warehouse(s)
Profitability
Funds Transfer
Pricing
Asset Liability
Management Ad Hoc
Customers Costing Marts
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11. OFSA
• ORACLE FINANCIAL SERVICES ANALYTICAL APPLICATIONS
– Oracle Financial Services Profitability Management
– Oracle Financial Services Profitability Analytics
– Oracle Financial Services Funds Transfer Pricing
– Oracle Financial Services Pricing Management, Transfer Pricing
Component
– Oracle Financial Services Asset Liability Management
– Oracle Financial Services Asset Liability Management Analytics
– Oracle Financial Services Balance Sheet Planning
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12. OFSA - ARHITECTURE
• ORACLE FINANCIAL SERVICES ANALYTICAL APPLICATIONS
FINANCIAL SERVICES BUSINESS INTELLIGENCE
Reports Alerts Dashboards Embedded
Unified Analytical Metadata
FINANCIAL SERVICES ANALYTIC APPLICATIONS INFRASTRUCTURE
Purpose Built Engines Common Tools Business Rules Stochastic Modeling
FINANCIAL SERVICES ANALYTIC APPLICATIONS DATA MODEL
Pre-Integrated/
Common Objects Common Dimensions High Volume
Extensible
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13. UNIFIED DATA MODEL
Inputs Processing Outputs
Common Staging Area App-specific processing App-specific result tables
ALM MR aCRM ALM MR aCRM
Facts Dimensions
Product COA FTP CR Basel II CR Basel II
Processors
Product PFT OR GRC OR
Transactions
Org Shared ProcessingTables Shared output tables
Ledger T2T
Customer
LedgerStat Exposures Account
Exposures
Summary Tables
Instruments (27)
Campaigns
Common Dimensions, Hierarchies, Master Tables
Master Data
COA Org Time Series Data (Rates,
Time Series Data (Rates,
Indicators, risk factors
Indicators, risk factors etc)
Product Customer etc)
Display Codes/Master tables
Common Metadata
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14. INFRASTRUCTURE
BUSINESS RULES RESULTS DATA MODEL ETL
SECURITY SYSTEM
FOUNDATION ADMINISTRATION
SHARED
COMPONENTS HARDWARE
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15. ANALYTICS
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16. FUND TRANSFER PRICING
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17. FUND TRANSFER PRICING
Organization Structure
• Margin = Credit for Funds less
Funding Center
Charge for Funds
responsible for
• FTP & NII Forecasts
• Rate Risk Management
Deposit Gathering Lending Operations
Transfer Rate Interest Rate
less Credit for Funds Less Charge for Funds
Net Margin Net Margin
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18. OFSA - FTP
• Multi-currency User Interface
Multi-
• TP Method Enhancements
• TP Add-on Rates
Add-
• Integration of Real-time
Real-
Pricing
• TP Methods Available for ALM
Forecasting
• TP Methods Available for BSP
Forecasting
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19. PROFITABILITY MANAGER
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20. PROFITABILITY CALCULATION
ACCOUNT LEVEL (MILLIONS OF RECORDS)
NET INTEREST INCOME
Asset: interest income less the cost of funds
ALL PRODUCTS
FTP Liabilities: benefit of fund less interest expense
PLUS This would include all the fees, service charges
FEES & SERVICE CHARGES and commission income that can be attributed to
NON INTEREST INCOME
an account
DIRECT EXPENSES MINUS Sales & service cost allocated either using top
OPERATIONAL EXPENSES NON INTEREST EXPENSE down methodology or activity based costing
ACCOUNT LOAN GRADE MINUS Based on the quality of the obligator,
The probability of default and exposure at
EXPOSURE AMOUNT EXPECTED LOSS
default.
DIVIDE
ALLOCATED RISK CAPITAL Capital charge calculated based on credit,
ALLOCATED CAPITAL CHARGE market and operational risk factors
+ OR - $’S PER ACCOUNT RAPM
RAROC – SVA
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21. MULTIDIMENSIONALITY
Account
Product Customer
Account
Branch Officer
Business Total
Units Bank
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22. PROFITABILITY MANAGER
• Improved Auditability
– Visual trace of allocation history
– Allocation interdependency and
ability to discriminate debits &
credits in results
• Model Structuring
– Standardized model and seeded
rules for account level
profitability
• Performance & Scalability
– Capable of highest transaction
throughput of tier one banks
• Account Level Profitability
– Built for lowest level account,
transaction and customer level
profitability
– Works with Hyperion Profitability
& Cost Management for top-top-
down and bottom-up profitability
bottom-
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23. ALLOCATION RULES
• INCOME/COST ALLOCATION RULES
• DRIVERS? (SQM, FTE, PERCENTAGES, OTHER?)
• FLEXIBILITY
• EASY MAINTENTANCE AND MODIFICATIONS
• TRACEABILITY
• BASED ON BUSINESS DECISIONS
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24. PROFITABILITY BI ANALYTICS
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25. OFSPA
• TECHNOLOGY
– ORACLE BI EE PLATFORM
– ESSBASE CUBES
• PRINCIPLES
– PERFORMANCE
– FLEXIBILITY
– STRUCTURED APROACH
• DASHBOARDS
– Account Level Profitability Dashboard
– Financial Accounting Dashboard
– Managerial Accounting Dashboard
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26. DASHBOARDS
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27. IMPLEMENTATION
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28. PROJECT
• BUSINESS REQUIREMENTS DEFINITION (BU FOCUS)
– FTP METHODOLOGIES
– PROFIT/COST ALLOCATIONS
– REPORTING REQUIREMENTS
– CUSTOMER HAS DW?
• SOLUTION DESIGN
– MODIFICATIONS & IMPLEMENTATION
– LOAD & TESTING
• PRODUCTION
– USE RESULTS IN DECISION MAKING PROCESS
• CONTINOUTS MAINTENANCE AND IMPROVEMENTS
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29. IMPLEMENTATION STEPS
Definition Solution Transition
Design
Preparation
Preparation and Development to
Phase
Analysis (Build) Phase Production
Project Preparation Review and document Technical Architecture Establish system Transitioning all
user requirements, for Profitability Solution tables and table system processes to
Establish Initial Work
technical environment, columns and build a production
Plan Design Profitability
Data requirements and review reports environment.
Business Rules
Establish Staffing & and sources
Project Work
Set up users, groups The data conversion
Organization Plan Technical Architecture
Define Template: and security access programs will be
for Budgeting and
Establish Project ? Reporting
rights and define and finalized
Planning Solution
Scope, Objective & Requirements create hierarchies
Training and hand-
Approach Design Budgeting and
? TP Methodologies Develop over to RI Staff
Planning Business
Kick- ff preparation
o and Yield Curves Functionalities and
Rules
? Unit Cost
User Interfaces
Kick- ff and
o
Calculation … where defined
Mobilization
? … …
…
Project Result
•Kick Off Event •Business
•Solution Design •MIS Solution •MIS Solution
•Basic Information Requirements
Document for Test GOING LIVE
prepared Document
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30. KEY POINTS
• RISKS
– DATA UNAVAILABILITY
– DATA QUALITY
– RESOURCE UNAVAILABILITY
– LOW EFFICIENCY IN DECISION MAKING
• IMPORTANT
– CLEAR STRATEGY ON FUTURE SYSTEM USAGE
– BUSINESS USERS COMMITMENT
– STRONG MANAGEMENT SUPPORT
– BALANCE BETWEEN SIMPLICITY – COMPLEXITY IN CONTRAST TO END
VALUE
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31. WWW.NEOS.HR