A Roadmap for Risk & Compliance

Transcription

1 <Insert Picture Here> A Roadmap for Risk & Compliance 26 May 2011

2 Safe Harbor Statement The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracle s products remains at the sole discretion of Oracle.

3 VISION INITIATION FOUNDATION Starting Out: Sample Roadmap to Assess Risk Systems DECOMM WALKER COST ALLOCATIONS GRC CONTROLS FINANCE FSAH GRANULAR DATA PLANNING & BUDGETTNG CAPABILITY REVIEW PRICE VAL N & P&L ATTRIB N ENTERPRISE PERFORMANCE MANAGEMENT ICAAP Pillar II BEST PRACTICE VISITS EDUCATION & AWARENESS CAPITAL MGNT STRESS & SCENARIO TESTING STRATEGIC FINANCE ECONOMIC CAPITAL OPTIMISE GRDW TECH PRIORITISE DATA DISCREPANCIES ASSESS DATA CONSISTENCY (DRM) DATA INVENTORY XLOB GOVERNANCE DESIGN AUTHORITY SOLVENCY II GRC REVIEW BASEL II SYSTEMS RATIONALISE CREDIT RISK SYSTEMS DATA MODEL DECOMM FERMAT DAILY RWA CREDIT RISK DECOMM ALGO REVIEW MARKET RISK ESTABLISH LOSS DATABASE OP MASTER DATA MANAGEMENT FINANCIAL REPORTING PILLARS III HR HIERARCHIES & SEGREGATION OF DUTIES STRESS TESTING CONSOLIDATE MARKET RISK SYSTEMS OP RISK RCSA ESTABLISH RISK LIBRARY TRADING COMPLIANCE SECURITY REAL TIME RISK CONTROLS & ACTIONS ECONOMIC CAPITAL GRC INTELLIGENCE ANTI MONEY LAUNDERING FRAUD KYC BUSINESS PROCESS MANAGEMENT MARKET RISK Business Intelligence TRANSPARNECY KEY RISK INDICATORS POLICY MGT REPUTATIONAL RISK STANDARDISED TO AMA APPROACH NEW PRODUCT GOVERNANCE RECORDS & CONTENT MGT AUDIT IMPROVEMEN TS REG REPORTING BI BUSINESS DESIGN EXTEND SOFTWARE GROUP EXTEND SOFTWARE DIVISION MIGRATE & DECOMM OPERATIONAL RISK REG RISK BUSINESS INFRAS TURE

4 Topics Framework <Insert Picture Here> Applying the Framework Liquidity Risk AML/Fraud Credit Risk 2008 Oracle Corporation Proprietary and Confidential 4

5 Bank-Wide, End-to-End Risk & Compliance Databases BI Dashboards Analytics Server Profitability / Risk Engine Managing Risk, Performance & Profitability Across the Enterprise Data Warehouse Profitability Performance Risk Management Compliance Multi Dimensional Profitability Customer Profitability Available to Front Office Product and Branch Profitability Activity Based Costing Transfer Pricing Planning & Budgeting Performance Scorecards Operational Cost Analysis Risk Adjusted Performance Mgmt Liquidity Risk Credit, Market & Operational Risk Measurement Complete & Transparent Audit Trail Asset/Liability Mgmt Regulatory Compliance Basel II SOX Anti-Money Laundering Regulatory Reporting Internal Controls Manager Fraud

6 Data Reconciliation & Cash Flow Edit Proposed Best Practice Solution End to End Performance and Risk Management Transactional Data Data Model General Ledger 1 Parameter Update General Ledger Other Data Standard ETL Process Instruments Meta Data Results 2 Model Define 3a Liquidity Model Processing 3b FTP Model Processing 3c Allocation Rule Processing Reporting And Analysis Periodic Administration Planning Oracle/Hyperion

7 Common ETL Layer (e.g.: Oracle Data-Integrator) Best Practice Risk Technology & Architecture Metadata Services Reporting / Querying/ OLAP Viewing Layer Common Operational Framework Metadata Enhanced Customer Relationships Performance Measurement Risk Management Modeling Sandbox Data Repository Data Marts Data Repository Mart builder Engine Data Aggregation Engine Rule-Run Engine Statistical / Stochastic Modeling Engine Content Mgmt (ECM). Bus. App. Services Rules Services Modeling Services Workflow Manager (BPEL) Web Service s Application Layer Java / J2EE User Portal Adhoc Querying / Reporting / Viewing OLAP Analysis Alerts Java / J2EE Delivery Platform Business- App Interface Common Security Framework

8 Key Requirement: Reconciliation with the GL Operational balances GL accounts mapping Identification of differences Adjustment entries Correction entries Running balance of residual adjustments Reports for verification and validation: Differences Adjustment entries Correction entries Non-reconciled balance

9 Topics Framework <Insert Picture Here> Applying the Framework Liquidity Risk AML/Fraud Credit Risk 2008 Oracle Corporation Proprietary and Confidential 9

10 Liquidity Risk Stress Testing Typical Process Flow Define Baseline Assumptions using Baseline Rules by business user rule definitions based on predefined business hierarchies / dimensions and business processors (formulae) Step 2: Execute Baseline Run baseline data from lines of business can be scheduled to run overnight as and when data arrives from each LOB Step 3 : Define Stress Rules and group them to form a stress scenario by business user users can select any baseline assumption rule and modify and save as stress rule Step 4: Map the Stress Scenario to the Baseline Run to form a Stress Run Step 5: Execute the Stress Run in the system to produce Stressed Liquidity Gap Report Step 6: Define Counterbalancing Strategy by business user Business user can choose and apply strategies like sale of collateral, repo of collaterals, new funding sources, etc. Step 7: System produces Revised Stressed Liquidity Report showing the effect of counterbalancing actions.

11 Oracle Liquidity & ALM Analytics Rates Historical Interest Rates Historical FX Rates Forecast Interest Rates Forecast FX Rates Term Structure Parameters IRC Details IRC Terms GAP Repricing GAP Liquidity GAP GAP Runoff GAP Prin Runoff GAP Reprice Runoff GAP Int CF GAP Runoff Net Rate Benchmark Values, Delta to Bench, Index to Bench Value Change Over Time Series, Month Change Over Time Series, Rankings Month Ago, Quarter Ago, Year Ago values.. Market Value Market Value Duration Current Balance Current Rate Weighted Avg Remaining Maturity Balance Sheet Forecasting and Income Simulation Beginning Balance Avg Balance Ending Balance Beginning Rate Ending Rate Avg Rate Interest Accrued Interest Cash Flow Value at Risk VaR Term Weighted Avg Probability Gross Probability Probability Decile Product Value at Risk Portfolio Value at Risk Market Value Earnings at Risk Product Earnings Net Interest Income Net Income Rate Path

12 Topics Basel II <Insert Picture Here> Applying the Framework Liquidity Risk AML/Fraud Credit Risk 2008 Oracle Corporation Proprietary and Confidential 12

13 Challenges in Financial Services Financial Services agencies must make decisions intelligently What valuation controls and principles should be applied to avoid mis-markings? Which credit requests should be authorized, adjusted, or denied? What criteria should drive audit selection? How should programs be funded? Which transactions are fraudulent? Which adjustments are non-compliant? How should credit history, bank activity, and lifetime events be weighted? Most agencies can t make the best decision for each interaction They lack a decision framework to express the logic of real-time decisions They lack analytics focused on interactions Business Goals cannot be effectively applied and measured Risk and compliance expertise is anecdotal and applied inconsistently Opportunities are missed and resources are wasted

14 What Does Real Time Decisioning (RTD) Do? Business Process Execution Makes decisions in real time in the context of each transaction Process data & context Business Process Optimization RTD Business Rules & Self-Learning Predictive Models Process decision point & feedback Takes into account multiple, competing business priorities e.g. maximise revenue whilst minimize cost and ensure channel compliance Automatically learns and self-adjusts based on feedback to continuously improve results Inputs Significantly more advanced and scalable than rule-based systems Enterprise Information Model Integrates across multiple interaction channels e.g. web, call centre, teller, kiosk, etc

15 RTD for Risk, Fraud, and Compliance Capabilities Model Integrated Risk Assessment Clear or review transactions based on risk profiles, compliance controls, and operational metrics Real-Time Analysis and Reports Web-based reports and analytical views for risk mgmt Risk Profile Management Manage and define risk profiles for automation Inline measurement of risk profile efficacy Predictive Analytics and Self-Learning End to end risk process analytics Trending and Best-fit profiles for Risk Discovery Inspection outcome propensity to avoid false positives Identify outliers for compliance measurement OOTB Business Controls Risk Sensitivity Randomization Blacklists and Greenlists KPI Controls Operational Process RTD Intelligence Process Secondary Process

16 Topics Framework <Insert Picture Here> Applying the Framework Liquidity Risk AML/Fraud Credit Risk 2008 Oracle Corporation Proprietary and Confidential 16

17 Credit Risk Decisioning RTD Risk Management Downstream Decisions Origination Application Reference Data Submission Verification/Validation Risk Assessment Internal & External Credit Rating/Scoring KYC/AML Check Policies and Overides Predictive Model Risk Models Risk Propensity Risk Indicators Detected No Risk or Exception Review Product offering Rate? Different Amount? Accept as Declared? Customs Review and Treatment No Yes Recommend Next Best Audit Step Approved Closing the Loop Inspection Recommendation Case Handling Case Resolved

18 Analytical Application Infrastructure OFSDW How Oracle Applies the Framework Functional View of Architecture Risk Dashboards & Reporting Oracle Pre-built Reports/Dashboards in OBIEE External BI tools with custom built content Enterprise Wide Analytics: Risk MIS & Regulatory Reporting Advanced Solutions RAPM RAROC / SVA Risk Based Pricing ICAAP Portfolio Models Risk Measurement & Management Oracle Calculation Engines Basel II Credit Risk Corporate & Retail Credit Risk In-house Calculation Engines Asset Liability Management Market Risk (VaR) Credit Risk Economic Capital Operational Risk Management Third Party Calculation Engines Operational Risk Economic Capital Liquidity Risk Management Risk Modeling PD Oracle Models Modeling Client-developed Cash Flow Models Third Party Vendor models e.g. Instrument External models Frequency invoked & LGD Modeling VaR Models Modeling hosted in OFSAA Risk Frontier (data interface) Pricing Models through Severity API calls Models Stress Testing Financial Services Data Warehouse Data Quality Checks, G/L Reconciliation, Manual Data Adjustments Common Data Repository Data Sources Credit Rating Systems Operational Systems Market Data Sources Data Repositories General Ledger 2011 Oracle Corporation Proprietary and Confidential 18

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20 Oracle Analytic Applications for Financial Services Governance Risk & Compliance Enterprise Risk Management Enterprise Performance Management Customer Insight Governance & Compliance Governance Compliance Risk Regulatory Compliance Anti-Money Laundering Trading Compliance Broker Compliance Fraud Detection Operational Risk Credit Risk Retail Credit Risk Corporate Credit Risk Treasury Risk Market Risk Asset Liability Management Regulatory Capital Basel II : Credit Risk Basel II : Market Risk Performance Management Multidimensional Profitability Customer Profitability Funds Transfer Pricing Finance Balance Sheet Planning Budgeting & Forecasting Consolidation Accounting Hub Marketing Portfolio Analytics Marketing Analytics Service Analytics Channel Channel Usage Channel Performance Sales Analytics Operational Risk Basel II : Operational Risk Specialized Analytics Economic Capital EC : Credit Risk EC : Market Risk Insurance Credit Cards Mortgages EC : Operational Risk

21 2009 Oracle Corporation Proprietary and Confidential 21