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SAP Business Suite powered by SAP HANA | Fact Book
BankingFind Out How SAP® Business Suite powered bySAP HANA® Delivers Business Value in Real Time
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Disclaimer
This document is not subject to your license agreement or any other service or subscription agreement with SAP. SAP has no
obligation to pursue any course of business outlined in this document or any related presentation, or to develop or release any
functionality mentioned therein. This document, or any related presentation and SAP's strategy and possible future
developments, products, and/or platforms directions and functionality are all subject to change and may be changed by SAP a
any time for any reason without notice. The information in this document is not a commitment, promise, or legal obligation to
deliver any material, code or functionality. This document is provided without a warranty of any kind, either express or implied
ncluding but not limited to, the implied warranties of merchantability, fitness for a particular purpose, or non-infringement. This
document is for informational purposes and may not be incorporated into a contract. SAP assumes no responsibility for errors
omissions in this document, except if such damages were caused by SAP's willful misconduct or gross negligence.
All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially
from expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only
of their dates, and they should not be relied upon in making purchasing decisions.
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SAP® Business Suite powered by SAP HANA
®
Banking Banks must seek new competitive advantages in response tochanges in customer trust, demographics, and demands, as wellas to profit margins reduced by higher capital requirements,compliance costs, and lower-fee income.
General Remark ......................................................................................... 4
Finance, Risk, and Compliance ............................................................ 5Finance and Risk Data Platform: One-Step Data Management for
Downst ream Applications ......................................................................... 5
Governance, Compliance, and Surveillance .....................................11
Compliance and Fraud Prevent ion and Detect ion ...............................11
Liquidity Risk Management ............................................................... 16
Manage Funding Liquidi ty Risk ............................................................... 16
SAP® solutions that leverage the power of the SAP HANA®
platform lead the way to new real-time business practices inthese key areas of banking:
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4
General Remark
Use of Generic Line-of-Business Scenarios
for Banks
In addition to the banking-specific usage of the SAP HANA offering, which isdescribed in the subsequent chapters, banks also demand generic line-of-
business (LOB) scenarios finance; governance, risk, and compliance
(GRC); human capital management (HCM); and sales.
In this context, the following banking applications, scenarios, and process
steps based on the SAP Customer Relationship Management (SAP CRM)
and SAP ERP offerings, were ported to the SAP HANA database starting
with release 7.0 of SAP CRM, EHP 3 and release 6.0 of SAP ERP, EHP 7:
SAP Deposits Management for Banking package
SAP Loans Management for Banking package
SAP Collateral Management for Banking package
SAP Reserve for Bad Debt package
Financial services business partner
SAP Account Origination for Banking package
SAP Leasing for Banking package
General Ledger connector for bank analyzer
Multicurrency accounting
Therefore, customers can use generic LOB scenarios supported by SAPBusiness Suite applications together with the above-mentioned SAP CRM-
and ERP-based banking applications, scenarios, and process steps on one
SAP HANA database instance.
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Finance, Risk, and Compliance
Finance and Risk Data Platform:
One-Step Data Management for
Downstream Applications
Business Practices Today
The information management landscape of banks is typically very
heterogeneous. Siloed solutions for risk, accounting, and regulatory
reporting built and owned by independent departments make it difficult to get
consistent information and to meet enterprise-wide reporting needs. Different
technologies and data aggregations lead to significant reconciliation efforts
and inconsistencies.
Adding to these challenges are the recent mortgage and European monetarycrisis, which have led to new regulatory requirements – for example,
international finance reporting standards (IFRS) 9, Basel Accords II and III,
in particular Basel Committee on Banking Supervision (BCBS) 225, 238, and
239 – that focus on finance and risk.
Today’s banking institutions have many reasons to consolidate their
information management landscapes, ranging from cost reduction, to greater
business insight, to improved market agility. Business and regulators require
intraday and simulative analytics functions, very often across functional
domains.
Ambit ion
Banks have to redesign the data management landscape to gain the
following benefits:
Consistent data storage
No reconciliation effort
Immediate reporting
Interactive analytics
Agile responsiveness
Simulation and prediction
All large banks are looking for a platform to act as central data storage –
containing all contracts, customers, transactions, and events – that allows
risk, accounting, management and compliance reporting and calculations.
This is more than a reporting tool. It is a data management infrastructure.
Innovations such as in-memory computing technology now provide
opportunities for banks to optimize and simplify their information and
reporting architecture.
Ad hocinteractiveanalysis
from days toseconds*
Stress test-ing and riskaggregationon demand
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SAP is able to provide a robust real-time data platform for finance and risk
through a suite of applications that either operate directly on the data
platform or that are integrated.
Challenges
Banks are driven by various internal and external factors requiring better
visibility into and transparency of their businesses. For example, banks need
to project contractual cash flows for underlying transactions when institutions
manage millions of transactions. Significant regulatory changes require
stringent compliance. Banks need to improve stress testing and accuracy of
analysis.
When banks have the ambition to build a finance and risk data platform the
challenge begins with the typically very heterogeneous landscape of source
systems. Data from a variety of sources has to be integrated in real time or
periodically. Data modeling and flow management need to be organized
centrally and supported by appropriate tools.
The finance and risk data platform has to serve different business needs and
requires a multipurpose data model. The platform needs to be able to
support standard reporting requirements as well as ad-hoc analysis.
Furthermore it has to serve the information needs of calculation processes
and applications that might be implemented based on SAP and/or third-party
applications. More and more results need to be produced in real time.
Instantroot-causeanalysismobile enabled
SAP HANA
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Business Innovation wi th SAP HANA
The implementation of the finance and risk data platform based on the
SAP NetWeaver® Business Warehouse (SAP NetWeaver BW) application
running on SAP HANA addresses the above mentioned challenges.
SAP NetWeaver BW on SAP HANA is the technological basis to consolidate
data across the enterprise from SAP and non-SAP sources.
Whereas SAP NetWeaver BW on SAP HANA is the core, other components
of the SAP Real-Time Data Platform complement the solution. SAP has a
collection of tools for data integration and data quality management that
support real-time, batch and stream-based data integration into
SAP NetWeaver BW on SAP HANA. Other solutions support the data
modeling and governance process.
Innovation in Detail
Less materialization: Given the processing power of SAP HANA, many
aggregations, transformations, and calculations can happen on the fly. This
leads to less materialization and more virtualization of classical data
warehouse layers. Redundant data structures, such as cubes, can be
replaced by views.
Flexibility: New reporting requirements can be addressed more easily and
flexibly by creating appropriate SAP HANA views.
Simplifi cation of system landscape: Finance and risk applications can be
deployed jointly with SAP NetWeaver BW on a single SAP HANA database.
This allows a more direct access to the data in the finance and risk data
platform and reduces redundancies.
Full drill-down tosinglecash flowsin seconds
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Data aging: Whenever banks have to handle volumes of Big Data, and not
all of this data is required on a daily basis, The near-line storage option for
SAP NetWeaver running on SAP HANA allows data storage on a cheaper,
yet still fast, database (with SAP Sybase® IQ database software).
Reduction of data latency: SAP HANA optimizes data store objects in SAP
NetWeaver BW on SAP HANA, reducing the data load time significantly. Thereduction of materialized levels within SAP NetWeaver BW further reduces
overall data latency.
Openness: With SAP NetWeaver BW on SAP HANA, business intelligence
(BI) tools and applications acquire a new set of interfaces to use for
operating on data. Structured query language (SQL) and open data protocol
(OData), for instance, are well-known and accepted standards.
Mobile: The complete information basis can be analyzed and explored using
mobile devices. This gives a bank always-on visibility into critical events and
situations.
Speed: SAP NetWeaver BW on SAP HANA provides tremendous
performance improvements. New kind of applications (for example, on
demand, intraday simulation, and stress testing) are possible.
Benefits
We achieved significant business benefits by using SAP HANA to optimize
management of business critical data for banks. This includes:
Better performance: SAP NetWeaver BW on SAP HANA fully leverages in-
memory computing technology innovations to dramatically improve the
performance of the solution.
Single source of truth: Finance and risk data management based on SAP
NetWeaver BW on SAP HANA provides the single source of truth for finance
and risk – down to the lowest level of granularity.
Ready fo r use: Predefined industry best practices provide comprehensive
scenarios covering data sourcing, integration, harmonization, calculation,
and reporting. In addition, the solution supports standardized reporting
processes and self-service analytics.
Integration: The value of the finance and risk data management solution is
increased through the comprehensive integration of analytics solutions, suchas BI and finance and risk applications.
Simplify IT
landscapewith reduction of datalayers and needed IT jobs
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Analy tics in real time: Thanks to real-time data analysis and accelerated
processes, business users get closer to the data to better interact and
improve decision making in a timely manner.
Fast implementation: Solutions can be implemented faster due to a simpler
architecture and configuration. This enables business users to get involved
in the project earlier, resulting in better-quality deliverables.
Easy access to data: Business users get closer to the data, resulting in
improved decision making with more accurate and detailed finance and risk
positions.
Lower total cost of ownership (TCO): Less redundant data structures (for
example, cubes, aggregates, and indexes) lower the overall TCO of a data
warehouse significantly.
Customer Proof Points
Let’s assume you’re planning an implementation project and haveapproximately 500 million records in your risk data mart. Based on our
experience with similar customer requirements, we have observed:
> 1000 times faster analysis of risk data
No aggregates needed thanks to on-the-fly aggregation of risk data
Time reduction from four hours to 15 seconds to analyze key risk
indicators, mobile enabled
From overnight to on-demand intraday stress testing of exposure at
default; expected losses and risk-weighted asset risk key figures along all
reporting dimensions
New capabilities thanks to ad hoc exploration with functionality for
drilling down to individual transaction details
Click here to read how a customer in Germany migrated its disk-based SAP
NetWeaver BW environment to SAP NetWeaver BW on SAP HANA with just
two days of downtime. This will lead to an increase in productivity of 50% to
70% due to shorter wait times.
>1000xfaster risk dataanalysis*
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Avail able Solutions and Outlook
SAP plans to integrate the existing finance and risk applications on a single
finance and risk data platform running on SAP HANA. The development of a
finance and risk reference data model for SAP HANA is one of the next
steps. Offerings, such as the SAP Bank Analyzer set of applications, are
planned to be made available in subsequent steps on SAP HANA andintegrated with the finance and risk data platform. New finance and risk
applications are planned to be built on SAP HANA. Partners and customers
can then develop and deploy their own solutions on the finance and risk data
platform.
Remark: The outlook provided in the illustration might be subject to changes.
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Governance, Compliance,and Surveillance
Compliance and Fraud Prevention
and Detection
Business Practices Today
In the past five years, there has been a renewed interest in fraud
management solutions in banking accompanied by a fresh wave of
implementations. This has happened for two primary reasons:
Stricter regulation and supervision – A general push is under way to
tighten supervision of the financial system, and a U.S.-led crackdown on
money laundering and terrorist finance has led to renewed interest in
prevention
Technology drivers – The rise of Internet and mobile banking has
increased the speed and volume of transactions. These technologies
have made financial crime easier to commit and made the job of
compliance and fraud teams harder to accomplish.
As a result, banks need to improve and consolidate their existing fraud
programs and systems. Point solutions for the various fraud scenarios are
no longer sufficient. Banks require a holistic approach to detect and prevent
financial crime. Therefore, they allocate resources, processes, and
technology to effectively monitor compliance and detect, prevent, and
investigate financial crime holistically.
Ambit ion
Banks must keep up with quickly changing fraud patterns, reduce damage
caused by fraud and irregularities, and comply with stricter regulations and
laws in all countries where they do business.
With the power of SAP HANA, fraud can be detected faster, rules can be
calibrated interactively, and new rules can be created more easily. SAP
HANA enables banks to address the various fraud and financial crime
scenarios holistically, based on one integrated platform, as illustrated in the
following:
100ximproved and faster fraud detectionprocess*
Pointsolutionsfor fraud
managementare no longer sufficient
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The SAP Fraud Management for Banking application powered by SAP
HANA provides the right controls and enable efficient processes to cope with
requirements across the various financial crime scenarios and meeting the
regulatory requirements based on one integrated platform.
Challenges
Banks have to tackle a growing number of fraud-related challenges:
Increasing complexity resulting from a siloed approach to financial crime
that increases the effort required to coordinate point solutions
Stricter and faster-changing regulatory environment
Stricter supervisions with intention of imposing heavy fines
Increasing risk to reputation resulting from the negative impact on
customer demand and share price
Exponential increase of the frequency and sophistication of fraud, waste,
and abuse
Diverse, complex, and constantly changing fraud schemes and strategies
Large number of false alarms (false positives)
Huge volumes of data from multiple sources
Operational and organizational silos
Holisticapproachbased on a single
and integratedplatform
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Business Innovation wi th SAP HANA
Using the power of SAP HANA, banks can combine data from multiple
sources and run detection rules in ultrahigh-volume data environments with
unmatched speed. Calibration and simulation of rules can be done
interactively on the full data set. SAP HANA search enables approximate
string match searches in structured and unstructured data. With theembedded predictive analytic library, banks can detect fraud patterns and
optimize detection rules.
Global fraud management dashboard showing the number of open alerts, efficiency, average
processing time, and top-10 countries by risk value across various regions
Innovation in Detail
The SAP Fraud Management for Banking appl ication enables banks to
analyze, detect, investigate, and p revent fraud and i rregularities in
ultrahigh-volume data environments. It targets both fraud and
compl iance scenarios that can be based on SAP and non-SAP data
sources. The fraud management application makes the foll owing
innovations possible:
A hol isti c approach: Because point solutions are costly and do not provide
deep insight across various topics, banks are currently looking for a platform
that can address all use cases related to financial crime. Because SAP
HANA can handle massive data volumes at low latency, it can help banks
meet this challenge.
Faster detection: Currently banks have extreme difficulty in detecting fraud
promptly, making it nearly impossible to prevent it.
As shown in the proof of concept (POC) described later in this document,
banks can significantly reduce evaluation run times. This is the prerequisite
to detecting fraud earlier and for implementing better detection methods.
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Greater accuracy: As proven by false positive rates that are far too high,
the current rules and methods that can be used for fraud detection are
neither effective nor efficient. With the online calibration tool provided by
SAP Fraud Management for Banking, banks can calibrate and back test their
implemented fraud detection methods to improve their efficiency.
Fraud management dashboard showing the most important information at a glance: alerts, top-
10 countries by risk value, fraud detection efficiency, average processing time, total risk value,
and more
Benefits
Paradigm sh ift: Thanks to its real-time processing functionalities and better
and faster fraud detection functionalities, SAP Fraud Management for
Banking can help banks shift their paradigms from fraud detection to
prevention.
Simplified IT landscape: Significant reduction in cost results fromleveraging one platform to combat financial crime and simplify the IT
landscape.
Effective integration: SAP Fraud Management for Banking readily
integrates with SAP core banking solutions.
Significant reduction in cost: Fewer fraud irregularities resulting from
better fraud detection methods and lower false positive rates (thanks to
online calibration of detection methods) result in more efficient and effective
overall fraud management.
Compliance: Predefined content helps support compliance (for example,with the Foreign Corrupt Practices Act, or FCPA).
Reduction of false positi ves: Interactive calibration and simulation
functionalities reduce the rate of false positives.
Efficient investigation: Simplified data exploration, use case-specific user
interfaces, and collaboration and documentation capabilities enable efficient
investigation.
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Proof Points
A proof of concept (POC) for fraud management for a tier-one bank was
done based on an anti-money laundering (AML) scenario. The current
banking solution requires between 40 and 60 hours for an entire evaluation
run. This is far too long and consequently prevents the bank from detecting
fraud early and implementing better fraud detection methods (that wouldalso increase the evaluation time).
The data volume used for the POC was 10 million customers, 20 million
accounts, and one billion of transactions. The data was uploaded to SAP
Fraud Management for Banking and between 7 and-10 of the most important
fraud detection rules for AML were implemented. The results of the POC
showed that the evaluation process could be reduced from 40 hours to two
minutes, or in other words, the evaluation process could be made 1200
times faster than before. The results also showed that the bank could take a
holistic approach to fraud, improve fraud detection by accelerating the
detection process significantly, implement better fraud detection methods,
and calibrate the currently implemented rules on the fly.
Road Map and Outlook
SAP Fraud Management for Banking provides functional and content
extensions on a quarterly basis.
The plan is to offer a fraud management platform for controlling financial
crime in 2014. The solution is intended to target both fraud (for example,
payment fraud, application fraud, and deposits fraud) and compliance
scenarios (for example, AML and the countering of terrorist financing) that
can be based on SAP and non-SAP data sources. SAP HANA enables
these scenarios to run on one integrated platform, supporting a holistic
approach and providing better insight into financial crime.
SAP plans to develop this solution together with customers through a co-
innovation partnership. The customers developing the solution together with
SAP would have the following advantages:
Banks supporting the co-innovation approach would be able to influence
the prioritization and the content of the development directly.
Time to market would be very low because new functionality and content
is expected to be shipped every three months.
Product Details and Prerequis ites
See installation guide for release 1.1 of SAP Fraud Management on SAP
Help Portal at http://help.sap.com/fra.
How to Get started
Implementation of SAP Fraud Management for Banking can start small, with
just a few data tables and rules. This helps to ensure faster time to value – in
weeks than rather months. From there, the data sources and rules can be
extended continually, based on priorities provided by customers.
1200xfaster evaluation*
One platformfor all fraud use cases!
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Liquidity Risk Management
Manage Funding Liquidity Risk
Business Practices TodayTo minimize the risk of missing capital for fulfilling payment obligations,
various activities relevant to funding liquidity risk have to be executed:
Collect cash flow information from various front-office or risk systems.
Calculate contractual and economic forward liquidity exposure as well as
the counterbalancing capacity on a regular basis.
Calculate key regulatory figures on a regular basis.
Report internal and external key figures and support their detailed
analysis.
Execute stress testing of the calculated figures.
Ambit ion
As a result of the credit crunch, in nearly all financial institutions, liquidity risk
has become the most important risk category. The widening of credit
spreads means higher liquidity costs requiring a highly efficient and effective
management of liquidity risk. Therefore, interactive liquidity risk management
enabling the analysis of instantaneously generated forward liquidity
exposures is a key capability.
As a result of the financial crisis, banks need the ability to perform ad hoc
definition and analysis of stress scenarios.
In addition, a long list of new regulatory requirements needs to be covered.
In the first place, Basel III requires key indices, such as the liquidity
coverage ratio, to ensure the short-term resilience of a bank’s liquidity risk
profile. Also required is the net stable funding ratio – a medium- to long-term
cash-flow key performance indicator for available-to-required funding.
Timeliness is more crucial than ever, requiring high-speed calculation
processes. Banks need to forecast future developments to better manage
risk potentials. Technology with mobile capability is needed to enhance
collaboration throughout the organization.
Seamlessdrill-downfrom keyfigure togranular dataproviding intuitive
understanding of results
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Challenges
Liquidity risk management should be possible in an interactive way – but
many financial institutions struggle with inconsistent cash-flow data, getting
correct cash-flow data to the right place, calculation performance, and
timelines. Finally and quite importantly, banks are not able to execute quick
analysis to support decision making. The following reasons are responsiblefor a poor liquidity risk management:
Conventional systems need hours to generate forward liquidity exposure,
especially when huge amounts come into play.
Analyzing the provided results is often time consuming due to long
answer times.
Market changes require new stress-test definitions, but their introduction
usually takes weeks, which is no longer acceptable in today’s volatile
environment.
“What-if” analysis in terms of new business means unacceptably long
execution cycles.
Forward-looking simulations in terms of internal and external key figures
are usually not supported or their execution is restricted to specific
parameters.
The impact of acquisitions and internal reorganizations often can’t be
estimated.
Collaboration between risk, treasury, and finance departments is not
supported, delaying decision making.
Many highly skilled people have to execute the reconciliation tasks as
processes that are partly manual, slow, and error-prone. Inefficient liquidity risk management requires relatively high liquidity
cushions resulting in extra liquidity costs.
Free upCapitalfor higher return
investmentsthrough liquiditycost reduction
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Business Innovation wi th SAP HANA
The SAP Liquidity Risk Management application powered by SAP HANA
helps banks meet key challenges in managing liquidity risk by enabling
business process innovations:
Real-time calculation of forward liquidity exposures and counterbalancing
capacity
Professional visualization of the results with state-of-the-art user
interfaces
Seamless drill-down from group-level results to individual cash flows
Ad hoc, interactive stress testing
Basel III compliance and simulation of key figures, such as the liquidity
coverage ratio, through time
Minimization of liquidity costs through efficient management of collateral
made possible by instantaneous calculation of selling strategies
supporting their optimization
Revolutionized decision making thanks to interactive stress testing and
new business simulation and to collaboration between relevant
departments
Visualization of forward liquidity exposures and counterbalancing capacities under normal and
stressed conditions, showing where detailed analysis could be started interactively into variousdimensions
Interactive,dynamicstresstestingenablingmultidimensionalinsights into riskpotential
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Innovation in Detail with SAP HANA
Real-time calculation: Aggregations can be executed on-the-fly and
forward liquidity exposures and counterbalancing capacity can be calculated
quickly (often within seconds), even if hundreds of millions of cash flows
come into play.
Seamless drill down: Elimination of aggregate tables puts a whole new
spectrum of information within reach. This way, results are analyzed from
the group level down to the individual cash-flow level. The steps of “slicing
and dicing” are defined by the user, and intermediate results are shown
through professional user interfaces.
Iterative stress testing: Due to very short answer times, business-relevant
parameters can be changed for arbitrary portfolios, and the impact on
liquidity profiles and collateral can be analyzed directly.
Simulation: Possible future developments can be analyzed through ad hoc
cash flow simulations. The outcome of different selling strategies for available collateral can be analyzed interactively. Different market liquidity
scenarios are taken into account through haircut management. Simulation
over time is enabled through parameterization of renewal, roll-over, and run-
off rates, which can be linked to arbitrary portfolios down to the single trade
level.
New business:To support decision-making processes across departments,
new business portfolios (for example, bond issues, hedge instruments) can
be introduced interactively on the cash-flow level, and the analysis of the
outcome can be performed in collaboration with different departments, such
as risk, treasury, and finance.
Mobile version: An integrated mobile version enables collaboration
between departments anytime and anywhere. Real-time calculations help to
guarantee quick communication.
End-to-endprocess canbe reduceddramaticallyfrom hours to seconds,simplifying architectures
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Benefits
We have achieved significant business benefits by using SAP HANA to
optimize and rethink business processes:
Analytics in real-time: Calculate and analyze data in real-time through
dynamically defined levels of detail.
Consistent data:Help ensure consistent static data and cash flow data
across all operative systems.
Interactive “what-if” analysis: Through interactive stress testing various
potential changes from the perspectives of customer behavior, market
development, and bank strategy can be analyzed interactively.
Reduction of liquidity costs: With cash flow simulation, various customer
behaviors, market developments, and bank strategies can be compared,
enabling the bank to reduce liquidity costs.
Enhanced decision making:The ability to take into account new business
portfolios and the support for collaboration among different departments
enables organizations to make decisions about liquidity usage.
Regulatory compliance:Basel III requirements are implemented, and the
current configuration from the regulator can be analyzed in a stress test to
determine the impact of upcoming regulatory changes.
Forecasting regulatory key figures: Calculating forward liquidity
coverage ratios is enabled via simulation through time, taking into account
user-defined dynamics in the portfolio development.
Proof Points
Let’s assume you’re planning an implementation project and have millions of
cash flows. Based on our experience with similar customer environments,
we have observed the following improvements:
Faster calcu lation of forward liquidity exposures and the
counterbalancing capacity, as shown in state-of-the-art user interfaces
Transparency resulting in better visibility into cash flow at the item level
to support root-cause analysis
From hours to seconds: dramatic reduction in end-to-end processthroughput time resulting from interactive analysis of the provided liquidity
risk profiles
Iterative stress testing supporting “what-if” analysis to enable
collateral optimization
Freeing up of capital for higher return investments through liquidity cost
reduction
Regulatory compliance supported by additional simulation through
time, allowing forecasting of key regulatory figures on simulated portfolios
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Road Map and Outlook
Please see the chapter “Available Solutions and Outlook” in the section
“Finance, Risk, and Compliance” earlier in this document.
Product Landscape Requirements
Please see the installation guide for release 1.1 of SAP Liquidity Risk
Management.
* Source: SAP internal lab tests as of Sept. 2013. All performance KPIs are preliminary. SAP internal lab measurements and productive customer
performance can deviate.
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