Software // Information Management
News
8/21/2013
10:54 AM
Connect Directly
Google+
LinkedIn
Twitter
RSS
E-Mail
50%
50%

IBM Credit Risk System Targets Big Banks

New regulations have added to CFO workloads, but capital management is the biggest challenge for banks. IBM promises quick risk insight.

Compared to financial services companies, manufacturers have it easy. Years ago, ERP system vendors started consolidating all the separate applications for inventory management, order management, bill of materials management, shop floor control, and so on. Banks, meanwhile, have siloed systems upon systems and faint dreams of developing the proverbial single source of truth.

"Banking is where manufacturing was 30 years ago," said Rory McClure, partner of risk solutions at IBM Global Business Services (GBS), in a phone interview with InformationWeek. "At international banks, it's typical to see, between lending and capital markets, more than 100 systems where risk is tracked. In big U.S. banks, it may be 20 or 30 systems."

IBM on Wednesday announced IBM Signature Solution - Risk Management, which promises to aggregate and analyze data from all of those systems in order to deliver timely, risk-aware decision support and risk management. Meeting the latest Dodd-Frank and Basel compliance requirements is one payoff, but more important is making the most of available capital, confidently knowing that reserve requirements have been satisfied.

[ Want to hear about Oracle's risk solution? Read Oracle Warehouse Meets Post-Financial-Meltdown Demands. ]

The Signature Solution for risk is based heavily on the technology of Algorithmics, a Toronto-based developer of risk management software that IBM acquired for $380 million in 2011. The new product also incorporates capabilities (as needed) from IBM Cognos (for dashboarding and reporting), FileNet (for imaging and workflow), IBM BigInsights (for news-feed analysis), IBM DB2 (for data warehousing), and DataStage (for data aggregation and integration).

Plenty of financial services are trying, and often failing, to keep up with new regulations and capital-management requirements through boil-the-ocean projects, according to McClure. What the Signature Solution provides is a starting-point blueprint, technology building blocks, and a collection of prepackaged and preformatted data models, frameworks and data integrations. It's a head start on aggregating and analyzing disparate data to give CFOs and others rapid, push-button insight into companywide risk and capital positions.

Putting all of that and technology into play is not a plug-and-play proposition, of course. McClure acknowledged that it involves a GBS services engagement to integrate the required technologies with the systems customers have in place. Deployments typically involve two phases. In the first phase, which aims to deliver value within the first year, the data-aggregation and core Algorithmics analysis technologies are deployed. The deliverable is a complete set of dashboards "that allows the CFO and the chief risk officer on a daily basis to understand their risk positions across the institution," McClure said.

The first phase essentially creates an analytic overlay on the lending, risk and other systems financial institutions have in place. In the second phase of Signature Solution deployment, financial institutions start to replace disparate and siloed legacy systems with optimized workflows running on the business process management engine built into Algorithmics. This is the phase in which inefficiencies are driven out of existing processes and procedures, and where change management comes into play.

"This fundamentally changes how organizations originate credit, and the idea is to integrate the business processes and the data that comes out of them," said McClure. The benefit is that "not only do we have a view of today, we have a view of tomorrow because we're seeing data in process before new loans are originated."

IBM isn't alone in taking on what is a gigantic, ongoing challenge for financial services organizations. Oracle, for one, has focused on the data-aggregation and analysis side of the problem with its Oracle Financial Services Data Warehouse, which was introduced in 2011. That system combines the hardware and database built into the Exadata engineered system with middleware connections to myriad financial applications.

Reference customers are hard to come by in the financial services industry because big banks don't like to talk about such mission-critical matters. IBM has implemented the major components of the Signature Solution - Risk Management at about a dozen big banks, according to McClure, and more than two dozen others have implemented the core Algorithmics risk management applications. At the time of IBM's acquisition, Algorithmics' named customers included Allianz Group, HSBC, Societe General and Scotia Capital.

Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
D. Henschen
50%
50%
D. Henschen,
User Rank: Author
8/21/2013 | 4:20:20 PM
re: IBM Credit Risk System Targets Big Banks
Make no mistake: this "solution" is not the equivalent of an ERP "system" for banks. The quick win is risk dashboards. Once that's done the solution may well consolidate overlapping legacy systems and replace them with new, optimized processes, but it will take a GBS services engagement to bring it all together (even if, as IBM says, there are "prebuilt and prepackaged blueprints, templates and frameworks" that give you a head start.
Any one of the components -- Algorithmics, Cognos, FileNet, and/or a DB2 data warehouse with DataStage ETL -- cloud take more than a year to implement. Put it all together and it's a two- to three-year project at a minimum.
The Agile Archive
The Agile Archive
When it comes to managing data, donít look at backup and archiving systems as burdens and cost centers. A well-designed archive can enhance data protection and restores, ease search and e-discovery efforts, and save money by intelligently moving data from expensive primary storage systems.
Register for InformationWeek Newsletters
White Papers
Current Issue
InformationWeek Tech Digest Septermber 18, 2014
Enterprise social network success starts and ends with integration. Here's how to finally make collaboration click.
Flash Poll
Video
Slideshows
Twitter Feed
InformationWeek Radio
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.