Download SAS Intraday Risk Aggregation and Analysis

 Solution Brief
Business Impact
Challenges
“Working with SAS®, we’ve been able to
bring the power of big data analytics to
bear to provide a single view of market risk,
in near real-time. This has enabled us to
optimise our capital buffers and gives us a
unique capability to understand and
analyse our risks and exposures, particularly
in periods of market instability.”
• Improved Capital Management. In the majority of banks, risk
reporting is currently a combination of manual and batch
processes that take many hours or even days to complete. The
financial impact of this is substantial as the bank has to carry
regulatory capital buffers to allow for differences in the estimated
and actual figures whilst reports are being run.
• Dynamically updating risk reports based on intraday
market changes, events and volatility shifts is one of the
major challenges of risk aggregation. Aggregating and
re-computing risk across multiple portfolios, geographies,
currencies and products on an intraday basis involves
significant complexities in data management and processing,
• The volume and complexity of data. Aggregating large
volumes of risk data (millions of transactions per day) from
disparate legacy systems has traditionally been achieved by
summarizing intermediate data sets which imposes severe
constraints on subsequent analysis. Banks need the ability to
investigate risks using on-demand hierarchies in near real time,
with the potential to drill down into the detailed source data.
• Limits Monitoring. Banks with substantial capital
markets risk exposures must have an intraday risk limits
regime in place to prevent traders from intentionally or
unintentionally exceeding their risk limits. At the Enterprise
level diversification and correlation effects can make limit
monitoring and alerting very complicated from a technology
and architecture standpoint.
Senior Executive, Tier 1 European Bank
Intraday Risk Aggregation and Analysis
The Issue
Our Approach
The banking crisis of 2008 shot “silo-based” risk IT architectures full of
holes, highlighting the huge gaps in responsiveness and accuracy of
existing IT risk architectures. Yet despite the tide of regulation that has
impacted banking since 2008, most banks still do not possess an
enterprise-wide capability to rapidly and accurately understand their
risk exposures and to provide actionable insights.
The SAS® Intraday Risk Aggregation and Visualisation solution helps
banks improve their risk management practices, satisfy regulatory
demands and reduce the punitive impact of maintaining excessive
regulatory capital. It is built on three core technology capabilities:
As a result there is an increasing demand for heightened intraday risk
controls, particularly in areas where electronic and high volume
trading dominate. Banks need to enhance their risk management
capabilities to incorporate complex analytics and improved data
management in order to validate compliance against regulatory
initiatives such as FRTB, Dodd-Franks and BCBS239.
The implementation of initiatives to meet FRTB is forcing banks to
consider the strategic and operational implications of regulatory
capital requirements for trading activities which will require increased
collaboration and common systems between front, middle and back
office functions.
As BCBS moves to revise the standard approach to increase risk
sensitivity and Expected Shortfall replaces VaR and Stressed VaR as
the primary risk measure, this will impose significant new computational demands for market risk calculation and analysis and requires a
level of sophistication and flexibility that most legacy risk architectures
do not possess.
• SAS® Event Stream Processing (ESP). The ESP network orchestrates and monitors extremely high data volumes from multiple
input sources with very low latencies for event processing. Transactions flow through the system throughout the day enabling books
of trade to be processed as they close. Instead of running dynamic
queries against static data, ESP enables simultaneous searching
through massive amounts of dynamic data to identify many
defined patterns;
• SAS® High Performance Risk. Our powerful risk engine enables
banks to run risk calculations and aggregate results quickly using
an In-Memory grid. Results can be sliced and diced in near real
time using hierarchies created “on demand”. This gives banks fast
and precise answers to questions about current and future P&Ls,
cash flows and risk exposures, enabling them to make well
informed decisions about portfolios – even in highly volatile
markets;
• SAS® Visual Analytics. Is an interactive data visualisation solution
that delivers fast insights into complex and large data sets for risk
and finance users. It offers powerful but easy to use analytics to
provide amongst other things forecasting, scenario analysis, goal
seeking, sentiment analysis and path analysis. Users are prompted
to build powerful, interactive dashboards and reports that can be
published anywhere including within Microsoft Office
applications.
The SAS® Difference:
The SAS® solution is an overlay which augments and
compliments the current risk infrastructure, leveraging latent
capabilities and protecting investment. It enables:
• Orchestration of trade and risk data from a variety of existing
systems;
• On demand analysis and exploration of complex and large
data sets;
• Scalable, high performance architecture capable of
performing complex, iterative analytical calculations on
millions of transactions;
• Rapid on-demand scenario analysis;
• The ability to react to market events with speed and
precision;
• High levels of manual intervention meant that data
transformations and lineage were not visible to risk
management inhibiting their ability to validate information
accuracy;
• The lengthy process meant market risk reports were based
on stale data leading to inaccurate analysis.
After an extensive review of the market place the bank selected
SAS®.
Solution
Using the SAS® Risk Aggregation and Visualisation solution the
bank can now automatically calculate complex market risk
analytics on its entire portfolio. Data volumes range up to 8
million transactions per day. Data quality has been significantly
improved and is clearly visible to Risk Managers.
• Flexibility to address changing regulatory requirements;
Results
• Self service visualization, dashboards and reporting.
Since going live the SAS® market risk solution has:
Case Study:
• Reduced the time to produce market risk reports from up
to 1.5 days to less than an hour;
Situation
• Enabled the bank to meet regulatory requirements and
minimize regulatory capital buffers;
A Large, Tier 1 European Bank
• Achieved rapid ROI through operational savings, replacing
5 legacy systems and many manual processes;
The bank recognised that substantial improvements were
required to its risk systems architecture in order to support the
increased demand for more efficient risk reporting and
analytics. Major problems included:
• Been extended to meet new use cases such as operational
risk and pre-trade analysis;
• Historical reliance on spreadsheets to collate summarized
data created regulatory audit issues;
• Become the strategic platform for major new risk initiatives
such as stress testing scenarios and FRTB compliance.
• Limited access to granular data resulted in an inability to
identify specific risk sources or carry out exhaustive stress
testing and simulations;
What if you could …
Rapidly Aggregate Risk
Undertake Ad Hoc Analysis
Reduce Capital Buffers
What if you could automatically
aggregate your market risk position
within minutes of a market closing
with visibility of data completeness
and quality?
What if you could investigate specific
risk exposures by dynamically drilling
down from the enterprise level to
identify the source transactions?
What if you could significantly reduce
your regulatory capital buffers?
SAS® invested 25% of 2015 revenue
into research and development,
demonstrating our commitment to
innovation and customer service.
SAS® solutions are used by more than
3,100 financial institutions worldwide,
including 97 percent of the banks on
the Fortune Global 500®.
You can. SAS® gives you
THE POWER TO KNOW®.
SAS® Facts
SAS® ranked as a category leader in
the Chartis RiskTech Quadrant® for
Risk Data Aggregation and Reporting
Systems 2016, recognising the
software’s “completeness of offering”
and “market share potential”.
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