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© 2012 IBM Corporation
Financial Risk Management In a SAAS Model
© 2011 IBM Corporation
Scenarios
Results
Simulation 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
Products
Risk Factors
0%
1%
2%
3%
4%
5%
6%
0 2 4 6 8 10 12 14 16 18 20
Models
ƒ{x, y}
Valuation
Portfolios
Mapping
Transparent simulation framework ERM Risk Management System
© 2011 IBM Corporation
Infrastructure, Platform and Software
© 2011 IBM Corporation
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
Extensive coverage Some Challenges Facing In-House ERM solutions
© 2011 IBM Corporation
“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
Extensive coverage Software As A Service
© 2011 IBM Corporation
– 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!
Extensive coverage Why Software As A Service ??
© 2011 IBM Corporation
Infrastructure, Platform and Software as Service
© 2011 IBM Corporation
Scenarios
T&C’s Risk factors
Engine 1 Engine 2 Open API
Management
Reporting Front office Risk Group
Hierarchies
What-if
A scalable and extensible architecture Functional architecture
© 2011 IBM Corporation
Challenges with SAAS
Reliance on 3rd party
Security
Transparency
Customization
9
© 2011 IBM Corporation
Service
Common data
New Features benefits
Community / Social
Hosted
Customization
Security
Scalability & Transparency
Extensive coverage Overcome the obstacles: Hosted vs. Service
© 2011 IBM Corporation
“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)
Extensive coverage BT Pension Scheme Management (BTPSM)
© 2011 IBM Corporation
Hosted Environments
Fin Engineering Scenarios Risk Control
Business lines
Mgt Reporting
Algo Risk Service
© 2011 IBM Corporation
SAAS model with 3rd Party Market Data
© 2011 IBM Corporation
Risk Reports
Simulation Scenarios Client 2
Client 1
Client 3
Market data Instrument data Holdings data
© 2011 IBM Corporation
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.
Extensive coverage Cloud Computing
© 2011 IBM Corporation
What is a Cloud ?
© 2011 IBM Corporation
What Is Virtualization?
© 2011 IBM Corporation
“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
Extensive coverage Cloud Computing
© 2011 IBM Corporation
Smaller Financial Institutions
Insurance Companies
Asset Managers
Fund Managers
Specific requirements (e.g. CVA)
Extensive coverage Who does this fit?
© 2011 IBM Corporation
Thank You For Your Time
Contact Information:
Mark Jacobs
Senior Director,
Risk Analytics, Israel
+972 (3) 918 8350