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© 2012 IBM Corporation

Financial Risk Management In a SAAS Model


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


Infrastructure, Platform and Software


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


“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


– 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 ??


Infrastructure, Platform and Software as Service


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


Challenges with SAAS

Reliance on 3rd party

Security

Transparency

Customization

9


Service

Common data

New Features benefits

Community / Social

Hosted

Customization

Security

Scalability & Transparency

Extensive coverage Overcome the obstacles: Hosted vs. Service


“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)


Hosted Environments

Fin Engineering Scenarios Risk Control

Business lines

Mgt Reporting

Algo Risk Service


SAAS model with 3rd Party Market Data


Risk Reports

Simulation Scenarios Client 2

Client 1

Client 3

Market data Instrument data Holdings data


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


What is a Cloud ?


What Is Virtualization?


“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


Smaller Financial Institutions

Insurance Companies

Asset Managers

Fund Managers

Specific requirements (e.g. CVA)

Extensive coverage Who does this fit?


Thank You For Your Time

Contact Information:

Mark Jacobs

[email protected]

Senior Director,

Risk Analytics, Israel

+972 (3) 918 8350

mailto:[email protected]

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