Cum sa-ti cresti profitabilitatea utilizand ultimele solutii pentru sistemul bancar. Push your performance beyond the break-even point.

Transcription

1 Cum sa-ti cresti profitabilitatea utilizand ultimele solutii pentru sistemul bancar. Push your performance beyond the break-even point. Pal Ribarics Financial Services Solutions, CEE & CIS Oracle

2 Agenda <Insert Picture Here> A New Era Demands New Solutions Integrated Risk and Performance Management A Convergence of Best of Breed Applications Introducing the New Applications Conclusions

3 A New Era Demands New Solutions

4 Lessons of the Financial Crisis Causes Many banks pursued growth above all other objectives. Risk management was ignored in some cases and considered a roadblock to closing business in others. Fundamental risk management principles and practices have been shown to be either badly flawed, structurally unsound or simply ignored. These growth-dominated strategies have proven painfully unsuccessful. Solutions Making risk a top organizational priority, integrate risk in to everyday business decisions, incorporate into credit or operational decisions, factor into compensation plans, in the assessment of financial results Managing for liquidity rather than exclusively for earnings or growth, understand how the institution is impacted by threats to liquidity and capital adequacy measure and meet risk-adjusted performance objectives, price products to reflect their true risk

5 Increased Awareness that Risk and Performance Management Must be Linked Lessons Learned from the Current Financial and Economic Crisis Strategic Alignment Between Business Strategy and Risk Appetite Has to be Improved 85% Strategic Decision Making Has to More Effectively Integrate Risk, Return, and Capital Mgmt Views 85% Enterprise-wide Awareness for Risk Has to Improve 82% In-time Availability of Integrated Risk, Finance, and Business Data Has to be Improved 80% Operational Decision Making Needs to More Effectively Integrate Risk, Return, and Capital Mgmt Views 78% Move Risk Mgmt Out of the Compliance Function to a "Business Partner" Role 68% Source: Managing Risk for High Performance in Extraordinary Times, Report on the Accenture 2009 Global Risk Management Study

6 Performance Management is part of the strategy

7 Funding and Liqudity Management is an Issue

8 Oracle s Financial Services Strategy Complete Open Integrated Complete Open Integrated Comprehensive Industry Portfolio Standards-Based Architecture Designed to Work Together More Value Less Complexity More Choice Less Risk More Flexibility Less Cost 8

9 Oracle s Financial Services Strategy Oracle s Strategy and Vision is based on the view that the best way to bring a wide range of domain specific software capabilities to market is through: 1 Developing and acquiring the most complete set of best of breed functional capabilities available from any one single vendor 2 Pre-integrating these best of breed solutions through process based integration to reduce complexity and cost for the customer 3 Standardizing and converging over time the integrated best of breed solutions onto a common, open technology architecture 4 Building an ecosystem of partners to complement our own capabilities for platform lead implementations 2009 Oracle Corporation Proprietary and Confidential

10 Agenda <Insert Picture Here> A New Era Demands New Solutions Integrated Risk and Performance Management A Convergence of Best of Breed Applications Introducing the New Applications Conclusions

11 Profitability Management How Risk Adjusted Profitability is calculated All Products RETURN Account Level (millions of records) Net Interest Income FTP Asset: Interest Income less the cost of funds Liabilities: Benefit of fund less Interest Expense Fees & Service Charges Direct Expenses Operational Expenses Plus Minus Non Interest Income Non Interest Expense This would include all the fees, service charges and commission income that can be attributed to an account Sales & Service cost allocated either using top down methodology or Activity Based Costing Account Loan Grade Exposure Amount RISK Minus Expected Loss Based on the quality of the obligator, the Probability of Default and Exposure at Default. Allocated Risk Capital Divide Allocated Capital Charge Capital Charge calculated based on Credit, Market and Operational Risk factors + or - $ s per Account RAPM RAROC SVA

12 Profitability Management Across Many Dimensions Account Product Customer Branch Account Officer Business Units Total Bank

13 The Importance of the Profitability Information (Westpac, Australia) 25% 20% 15% % of client base Sample 3m clients Moving 1/3 of the zero profitable customers up one segment generates an increased client profit contribution of $75m per year 10% 5% 0% Client profit contribution - $ per month

14 Value of Profitability Information External Reporting Internal Management Strategic Planning Performance Measurement Resource Allocation Incentive Compensation

15 Value of Profitability Information External Reporting Internal Management Segmentation / Targeting Differentiated Service Levels Relationship Pricing Channel Development Tactical / Operational

16 Profitability questions Which customers are profitable? What is it that makes them profitable? How should we price based on segment/relationship? Should I charge this fee for this customer? What would happen to profitability and customer satisfaction if we stopped selling product X in branches? Can we predict which product a customer will buy next if they have already purchased a bank account and a consumer loan? What is the most cost effective level of service to provide for this customer? What price for this customer for this product (or service) is likely to generate a profit? What is the best way to sell our products? Which sales force is most effective? Are there differences in the quality of sales between different sales people?

17 Customer Overview Customer Profitability Analysis Customer Profile Customer Profitability Product Portfolio / Cross Sell RAROC Analysis

18 Lessons Learned from Financial Turmoil Responses from the Banking Industry Liquidity is king 88% Institutionalize a risk culture 73% Stay attuned to industry dynamics 60% Don't forget the people factor Prepare for the unexpected 35% 40% Don't rely on rating agencies alone 23% Source: "Navigating the crisis: a survey of the world's largest banks, Ernst & Young, 2008

19 To manage market uncertainty and liquidity, one has to manage actively the balance sheets and net interest incomes with more what if simulations to identify possible outcomes upfront Expected Value Business Scenarios Potential Loss Target Variable (NII or MV) distributions Interest Rate Scenarios Simulation Processes: Scenario-based Stochastic Current Value Funding & Hedging Scenarios Return Risk

20 Review not only the Past, but also simulate what can be done in Future Forecast Interest Rate Scenarios (e.g. HIBOR) 5 HKD yield curves Sep Dec Mar Jun M HIBOR 3M HIBOR 6M HBOT 9M HIBOR 12M HIBOR 2Y EFN 3Y EFN 5Y EFN 7Y EFN 10Y EFN 3/31/2005 6/30/2005 9/30/ /30/2005 2/28/ Sep Dec Mar Jun 3M HIBOR Vs PRIME Sep Dec Mar Jun M HIBOR PRIME(HSBC) Sep Dec Mar Jun Source: HKMA

21 By simulating multiple Business Scenarios at the same time Forecast Interest Rate / Currency Scenarios 1 Customer Behavior Scenarios a New Product Scenarios i Sep Dec Mar Jun 2 Sep Dec Mar Jun b ii 3 Sep Dec Mar Jun c iii 4 Sep Dec Mar Jun d iv

22 Simulating multiple Business Scenarios at the same time New Business / New Branch Scenarios 11 Funding & Hedging Scenarios A Simulation Results Sep Dec Mar Jun 22 Sep Dec Mar Jun B 33 Sep Dec Mar Jun 44 Sep Dec Mar Jun New Balance New Maturity New Pricing.. Repricing Gap Report Liquidity Gap Report Net Interest Income Report Market Value Report Duration Report Earning At Risk Value At Risk..

23 Example : Managing Liquidity Liquidity Risk Scenario: Takes few days to understand the bankwide liquidity positions. Extra fund is reserved for the purpose of ensuring sufficient liquidity. Impact : In view of uncertain cash flow forecast, extra fund is put aside to cushion liquidity risk. This reduces ROE. Use of Oracle ALM System: Able to generate Daily Liquidity Gap Report / Fund Flow projection. Offer dynamic view with what if scenarios for ALCO / Treasury to execute hedging and funding strategy Faster. Relieve capital due to improved liquidity risk management Liquidity Gap Report 1 D 7 D 2 W 1 M 2 M 3 M+ 1 D 7 D 2 W 1 M 2 M 3 M+ Gap Gap limit limit ALM system Simulation Acct Gap Acct Gap Scenario 1: Interest Rate 25bp Up in 1 week Scenario 1a: Do nothing Scenario 1b: New Funding

24 The Liquidity Measurement Approach Methods from the Asian Crisis (Oracle) First level Contractual Maturity Cash Flow Engine to generate Maturity Profile Behavioural Maturity Premature Upliftments Rollover Characteristics On Balance Sheet Assets & Liabilities (No Off Balance Sheet or Treasury) Second level Model Shock Withdrawal Third level Distribution Profile of Customer Concentration of Funding Source Fourth Level Liquid Assets

25 Agenda <Insert Picture Here> A New Era Demands New Solutions Integrated Risk and Performance Management A Convergence of Best of Breed Applications Introducing the New Applications Conclusions

26 Oracle s Analytical Applications Strategy in Financial Services 1. Merge Best-of-Breed capability across products Financial Services Applications 2. Create a single integrated platform UNIFIED ANALYTICAL METADATA FINANCIAL SERVICES BUSINESS INTELLIGENCE FINANCIAL SERVICES ANALYTICAL APPLICATIONS FRAMEWORKS FINANCIAL SERVICES ANALYTICAL APPLICATIONS DATA MODEL

27 Overview of Financial Services Analytics products Financial Services Applications Hundreds of customers worldwide Account level/customer level profitability at massive scale including FTP Leading ALM Vendor in APAC/MEA Global Tier I customer base using FTP and Allocations Capability Very large deployments with integrated Financial Close Leading Risk Vendor across all risk types Core technology provider for platform capabilities Deployed in Tier I s globally Hyperion Planning and Essbase deployed globally in Finance Organizations De facto standard for budgeting process

28 Customer Advisory Board Members

29 Building Blocks Shared Components across Applications FINANCIAL SERVICES BUSINESS INTELLIGENCE Data Sources Unified Analytical Metadata Reports Alerts Dashboards Embedded FINANCIAL SERVICES ANALYTICAL APPLICATIONS FRAMEWORKS Purpose Built Engines Common Tools Business Rules Stochastic Modeling FINANCIAL SERVICES ANALYTICAL APPLICATIONS DATA MODEL Common Objects Common Dimensions Pre-Integrated/ Extensible High Volume

30 Financial Services Business Intelligence 2008 Oracle Corporation Proprietary and Confidential

31 Financial Services Analytical Applications Infrastructure Modeling & Stress Testing Framework Computations & Rules Framework Run Framework Mart Management Framework Statistical Library Business Processors Conditional Exec Cube Builder Modeling sand-box Stress Testing Multi-hierarchy conditional-rules Rules executed in DB Baseline Run Simulation Run Relational Mart Blder Aggregator & OLAP Computed Measures UNIFIED ANALYTICAL METADATA FINANCIAL SERVICES BUSINESS INTELLIGENCE FINANCIAL SERVICES ANALYTICAL APPLICATIONS FRAMEWORKS FINANCIAL SERVICES ANALYTICAL APPLICATIONS DATA MODEL Forms & Workflow Framework BPEL Workflows Forms Manager Business Mapper T2T Data Process Framework Data Quality Batch & Real-Time Management Metadata Mgmt Framework Data Movement Data Quality Multi-node dispatch Data Model Mgt Data Aggregations Business Integrity Scheduler Metadata Trace SCD and Controls DQ Reporting Data Access Svcs Metadata Browser

32 Financial Services Analytical Applications Data Model Instruments Accounts Current Accounts Savings Accounts TD Contracts OD Credit Lines Accts Loan Contracts Credit Cards Mortgages Leases Mortgage Backed Securitization Bills Contracts LC Contracts Guarantee Mutual Funds Money Market Contracts Mortgage Offset Accounts Futures Contracts Options Contracts Repo-Contracts Fct Swaps Forex Contracts Break Funding Borrowing Forward Rate Agreement Insurance Investment Annuity Trusts Retirement Accounts Other Services Masters Dimensions Organization, Customer, Product, Process, Geography, Transaction Types etc. Designed for SCD management Used in Security management of various downstream applications. Core analysis Dimensions. Customers Relationships Master designed to store a unique set of customer information unique across all products within the Bank. Contains basic customer data and analytical information related to the customer. Designed for time-variant behavior Transactions Events Designed to capture financial and non-financial events related to customer interactions thru accounts and channels Available for behavior detection, segmentation, cost allocation etc purposes General Ledger Designed for multi-currency, multi-lv, multi- GAAP ledgers intended for management and financial end-use Ledger transactions to support balance details Available for reconciliation control and performance reporting use

33 Agenda <Insert Picture Here> A New Era Demands New Solutions Integrated Risk and Performance Management A Convergence of Best of Breed Applications Introducing the New Applications Conclusions

34 Announcing Oracle Financial Services Enterprise Performance Management Oracle Financial Services Profitability Management Oracle Financial Services Profitability Analytics Oracle Financial Services Funds Transfer Pricing Oracle Financial Pricing Management, Transfer Pricing Component Oracle Financial Services Asset Liability Management Oracle Financial Services Asset Liability Management Analytics Oracle Financial Services Balance Sheet Planning* Early adopter release in September 2009 GA release in November 2009 Early adopter release in September 2009 GA release in November 2009 *Note: Planned for a later release

35 Integrated Risk and Performance Our Vision of Completness Performance Management Profitability Funds Transfer Pricing Consolidation Accounting Hub Activity-Based Costing Balance Sheet Planning Budgeting and Forecasting Pricing Management Credit Risk Analytical CRM Retail Credit Risk Corporate Credit Risk Performance Management Portfolio Analytics Marketing Analytics Treasury Risk Service Analytics Market Risk Asset Liability Management Regulatory Capital Basel II: Credit Risk Basel II: Market Risk Risk Management Customer Insight Channel Insight Channel Usage Channel Performance Basel II: Operational Risk Capital Adequacy/ICAAP Economic Capital EC: Credit Risk EC: Market Risk EC: Operational Risk Governance & Compliance Customer Profitability Customer Profitability Product Profitability Regulatory Compliance (Financial Crime) Anti-Money Laundering Fraud Detection Governance and Compliance Governance Compliance Risk Broker Compliance Trading Compliance Operational Risk

36 Enterprise Risk Adjusted Performance Management Capabilities Unified data model for risk and finance; eliminates reconciliations and definitional issues Market Leading Funds Transfer pricing High performance multidimensional allocations capability to customer/ account level Market leading capital calculation for EC and Basel II Single technology stack Required Solution Components: Optional Solution Components: RAROC and SVA Dashboard, OFSPA Oracle Financial Services Profitability Analytics Oracle Financial Services Profitability Management Oracle Financial Services Funds Transfer Pricing Oracle Reveleus Economic Capital Oracle Reveleus Basel II 2009 Oracle Corporation Proprietary and Confidential

37 Enabling Finance Transformation Capabilities Consistent, auditable statutory and management reporting Single data flow substantially reducing need for reconciliation Extremely fast financial and management close IFRS compliant Ability to drill to detail from Top of the House Finance Architecture, Tier I Bank Optional Solution Components: Oracle General Ledger and Oracle Financial Accounting Hub Oracle Financial Services GL Reconciliation Oracle Hyperion Financial Management Oracle Profitability Management & Profitability Analytics Oracle Financial Services Analytical Applications Infrastructure 2009 Oracle Corporation Proprietary and Confidential

38 Oracle Pricing Management Capabilities Single Pricing model incorporating all components of profitability Fully integrated with Transfer Pricing engine to model Transfer Prices, Adjustments, and Options Costs Merged Costing model with Oracle Financial Services Profitability Analytics Unified pricing model with Oracle Reveleus Risk applications Adjustable Rate Mortgage Pricing, Oracle Pricing Management, TPC Required Solution Components: Optional Solution Components: Oracle Financial Services Pricing Management, TP Component Oracle Financial Services Pricing Management, Capital Component** Oracle Financial Services Funds Transfer Pricing Oracle Reveleus Basel II and Economic Capital **Note: Planned for a later release 2009 Oracle Corporation Proprietary and Confidential

39 Liquidity Risk Capabilities Measure Liquidity Gaps Out of the Box reports to address BIS and local liquidity reporting requirements Enables demonstrable System and Controls Framework Multi Entity, multi currency enabled Wide Product Coverage Liquidity Gap Reporting, Oracle Reveleus Asset Liability Management Required Solution Components: Optional Solution Components: Oracle Financial Services Asset Liability Management Analytics Oracle Financial Services Asset Liability Management Oracle Reveleus ICAAP 2009 Oracle Corporation Proprietary and Confidential

40 Agenda <Insert Picture Here> A New Era Demands New Solutions Integrated Risk and Performance Management A Convergence of Best of Breed Applications Introducing the New Applications Conclusions

41 Oracle Financial Services Analytical Applications and Analytics for Enterprise Risk Measure And Meet Risk-adjusted Performance Objectives Actively incorporate risk into decision making Define and manage plans that cross risk and performance management Use best practice processes and techniques Promote a Transparent Risk Management Culture Reduce uncertainty with pervasive analytics and business information across the enterprise Gain insight into critical risk areas with role-based dashboards and drill-down reporting Create confidence in the results with reliable and transparent data and rules Mitigate the Costs of Regulation and Lower TCO Have the confidence of investing in a strong provider of best of breed capability Reduce operating costs implementing integrated solutions Interoperate with existing and legacy applications through Oracle s open architecture

42 The Oracle Competitive Differentiators One Common Platform for all information and services End-to-end risk and performance management analytic apps Built in prepackaged and preintegrated Business Intelligence Common analytics platform for all risk and performance management analytic applications Industry specific logical and physical data warehouse providing a single source of the truth, bringing risk, finance and customer data together Most comprehensive all-in-one solution the market has seen Most comprehensive suite of risk and performance management solution, completely integrated with data warehousing and business intelligence First ever analytic applications suite to enable risk and finance practices to come together Takes Think Big Start Small approach. Comprehensive yet modular architecture and deployment Leverages OBIEE with pre-built and pre-integrated business intelligence applications Subject matter specific data marts provide industry best practices reporting and analysis Thousands of pre-built reports, KPI s and role specific dashboards provide fast out-of-the-box deployments

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