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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”. SAS UNITED KINGDOM WITTINGTON HOUSE HENLEY ROAD MEDMENHAM MARLOW BUCKS SL7 2EB +44 1628 486933 WWW.SAS.COM/UK SAS and all other SAS Institute Inc. product or service names are registered trademarks or trademarks of SAS Institute Inc. in the USA and other countries. ® indicates USA registration. Other brand and product names are trademarks of their respective companies. Copyright © 2016, SAS Institute Inc. All rights reserved.