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Provides an overview of SAP HANA and how in-memory technology helps banks solve the business challenges around liquidity risk management.
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Liquidity Risk Management powered by SAP HANA
© 2012 SAP AG. All rights reserved. 2
Legal disclaimer
This presentation is not subject to your license agreement or any other agreement with SAP. SAP has no obligation to pursue any course of business outlined in this presentation or to develop or release any functionality mentioned in this presentation. This presentation and SAP's strategy and possible future developments are subject to change and may be changed by SAP at any time for any reason without notice. This document is provided without a warranty of any kind, either express or implied, including but not limited to, the implied warranties of merchantability, fitness for a particular purpose, or non-infringement. SAP assumes no responsibility for errors or omissions in this document, except if such damages were caused by SAP intentionally or grossly negligent.
© 2012 SAP AG. All rights reserved. 3
Agenda
What is HANA?
Challenges in Liquidity Risk Management
LRM@HANA Overview
What is HANA?
© 2012 SAP AG. All rights reserved. 5
Banks face an information availability problem
???Data volumeis exploding
Calculation speedis stagnating
Requirements on information availability are increasing
Traditional approach of OLTP and OLAP fails
© 2012 SAP AG. All rights reserved. 6
Boundary conditions for high performance computing
CPUs do not get faster
Memory and storage prices (1955-2010)
Number of cores on the rise
CPU clock speed – memory bandwidth –memory latency
© 2012 SAP AG. All rights reserved. 7
64bit address space max at 2TB in current servers100GB/s data throughputDramatic decline in price/performance
Multi-Core Architecture (8 x 8 core CPU in one server)Massive parallel scaling with many bladesOne blade ~$50.000 = 1 Enterprise Class Server
Row and Column Store
Compression
Partitioning
No Aggregate Tables
The elements of In-Memory computing are not new. However, dramatically improved hardware economics and technology innovations in software has now made it possible for SAP to deliver on its vision of the Real-Time Enterprise with In-Memory business applications.
In-memory computing – the time is NOW
HW Technology Innovations SAP SW Technology Innovations
+
© 2012 SAP AG. All rights reserved. 8
SAP HANA appliance software
SAP HANA™In-Memory software + hardware(HP, IBM, Fujitsu, Cisco, Dell)Data Modeling and Data ManagementReal-time Data ReplicationSAP BO Data Services for ETL capabilities from SAP Business Suite, SAP Business Warehouse (SAP NetWeaver BW), and 3rd Party SystemsSAP NetWeaver as In-Memory app. server
Capabilities EnabledAnalyze information in real-time at unprecedented speeds on large volumes of non-aggregated dataCreate flexible analytic models based on real-time and historic business dataBuild new category of applications (e.g., planning, simulation) to significantly outperform current applications in categoryMinimize data duplication
SAP HANA
SQL MDXBICSSQL
SAP BusinessObjects
toolsOther query tools
SAP BusinessSuite
Other data sources
SAP NetWeaver Business
Warehouse
SAP HANA Studio and Modeler
SAP In-Memory Database
Calculation and Planning Engine
Row & Column Storage
Real-Time Data Replication
SAP Business Objects Data
Services
SAP NetWeaver
© 2012 SAP AG. All rights reserved. 9
Memory in TB area is becoming available on commodity hardware
32 bit Systems 2^32 = 4.294.967.2964GB limit per CPU
64 bit Systems 2^64 = 18.446.744.073.709.551.616Only constraint by physics (64/128 modules)
Capacity per module growswith new production processes
(8GB – 16GB – 32GB)
Price per module shrinkswith new production processes
(-30% with 32nm)
1 blade with 64 modules can hold up to 1TB (16GB)
© 2012 SAP AG. All rights reserved. 10
Thinking in-memory
Delegation of data intense operations to the in-memory computing
Application Layer
Data LayerToday‘s applicationsexecute many data intense operations in the application layer
High performance appsdelegate data intenseoperations to the in-memory computing
In-Memory Computing ImperativeAvoid movement of detailed data –calculate first, then move results
© 2012 SAP AG. All rights reserved. 11
Standard System
In-Memory System
SAP HANA in action – tier 1 bank(see below for SAP LRM-specific performance results)
73GB
5,2 GB
10 seconds60 minutes
© 2012 SAP AG. All rights reserved. 12
How HANA helps banksOpportunities for your business
Human Resources
Strategic Workforce Planning and Reporting
Corporate Services
Advanced and optimized Purchasing
Invoicing analysis and acceleration
Finance & Risk
Fast and accurate Finance ReportingLiquidity Risk ManagementAccelerated AccountingIntegrated Profitability Management
Transactional Banking
Transaction history and advanced analysis capabilitiesReal time fraud detection & action
Loan portfolio analysis
Monitor mission critical processes
Sales, Service, Marketing
Sales Analysis across all channels Customer segmentation and exploration for cross-selling and marketing campaigns
Know your customer by a consistent, up-to-date 360° view
© 2012 SAP AG. All rights reserved. 13
SAP HANA
Categories of usage scenarios of SAP HANA
Analytics on any data source
Transaction HistoryFinancial Reporting
AFI RDL ExtensionCO-PA Accelerator
EDW for SAP and Non-SAP data
Liquidity Risk ManagementFraud Management
Business Suiteon HANA
Accelerators
ReportingBW on HANA
Database
High Performance Applications
Technology
© 2012 SAP AG. All rights reserved. 14
LiquidityRisk
Management
Available usage scenarios of SAP HANA for banks
Technology
Accelerated Financial Reporting
AFI RDL Extension
BW on HANA
Fraud Management
CO-PA Accelerator
FI/CO Accelerator
Transaction History
Planned
Q3/2012Q1/2013
Q4/2011Q4/2011
Q2/2011
Q3/2011Q4/2011
Q4/2012…/…
Q1/2012
Potential Future
Functions
Not exhaustive
© 2012 SAP AG. All rights reserved. 15
SAP HANA™ provides the solution to the informationavailability problem
Next Gen Platform for SAP Apps integrating OLAP+OLTP
Manage high data volume
Increasecalculation speed
???
Reduce information latency
Challenges in Liquidity Risk Management
© 2012 SAP AG. All rights reserved. 17
Funding Liquidity RiskInternal Risk Management
Risk that the firm will not be able to meet efficiently both expected and unexpected current and future cash flow and collateral needs*A first step of a funding liquidity risk calculation consists in calculating the Forward Liquidity Exposure in terms of the Legal Cash Flow Gap.
In a second step hypothetical cash flows should be taken into account as well. These simulations should be driven by market development, customer behavior and bank strategy to generate a more realistic Economic Cash Flow Gap.
If liquidity gaps are detected when analyzing the economic cash flow gap, a third step consists in calculating the Counterbalancing Capacity. All assets like bonds or committed lines are used to resolve potential liquidity bottlenecks.
* Basel Committee on Banking Supervision – BCBS 144 Principles for Sound Liquidity Risk Management and Supervision
© 2012 SAP AG. All rights reserved. 18
Market Liquidity RiskInternal Risk Management
Risk that a firm cannot easily offset or eliminate a position at the market pricebecause of inadequate market depth or market disruption*.This risk could come up in conjunction with OTC trades or when solving liquidity gaps with the release of huge positions exceeding usual trading volumes.Market Liquidity Risk is currently not in focus.
* Basel Committee on Banking Supervision – BCBS 144 Principles for Sound Liquidity Risk Management and Supervision
© 2012 SAP AG. All rights reserved. 19
Funding Liquidity Risk to be based on cash flows being the least common denominator
Funding Liquidity Risk Management needs to be done comprehensively, all on- and off-balance sheet positions have to be taken into account.Cash flow view supports New Product Procedure in terms of flexibility.Relevant reporting and steering could be done on Cash Flows.Cash Flow roll out for complex instruments to be done by dedicated systems.– Consistency with other risk categories crucial (e.g. different risk types based on the same
curves).– Actual market data needed, due to illiquidity traders’ expertise sometimes required– Complex pricing algorithms needed, difficult to replicate– Banks often do not want to disclose pricing algorithms
© 2012 SAP AG. All rights reserved. 20
Liquidity Risk ManagementRegulatory requirements
Issue date/issuer 2008 2009 2010BCBS(Basel Committee on Banking Supervision)
BCBS 136 Liquidity Risk: Management and Supervisory ChallengesBCBS 144 Principles for Sound Liquidity Risk Management and Supervision
BCBS 155 Principles for sound stress testing practices and supervision BCBS 157 Enhancements to the Basel II frameworkBCBS 158 Revisions to the Basel II market risk frameworkBCBS 159 Guidelines for computing capital for incremental risk in the trading book
BCBS 188 Basel III: International framework for liquidity risk measurement, standards and monitoring
EBA (European Banking Authority)
CEBS (CP 28) Guidelines on Liquidity BuffersCEBS (CP 31) Guidelines on aspects of the management of concentration riskCEBS (CP 32) Guidelines on Stress Testing
CEBS (CP36) Guidelines on Liquidity Cost Benefit Allocation
UK FSA(Financial Services Authority)
CP 08/22 Strengthening liquidity StandardsCP 08/24 Stress and scenario testing
CP 09/13 Strengthening liquidity standards 2: Liquidity reportingCP 09/14 Strengthening liquidity standards 3: Liquidity transitional measures
BIPRU Chapter 12: Liquidity standards
US Dodd-Frank Wall Street Reform and Consumer Protection Act
© 2012 SAP AG. All rights reserved. 21
LCRRatio:
Level 1: Cash, Sovereign and Central Bank Debt (usually 0 % Risk Weight*), …
Level 2: Sovereign and Central Bank Debt (usually 20 % Risk Weight*), AA- or higher rated bonds, …
Cash Outfllows: Retail deposits, Unsecured Wholesale Funding, Repos, CCLs, Derivative Outflow
Cash Inflows: Reverse Repos, Obtained Credit Lines, Other Inflows
Regulatory Capital
(Less) Stable Deposits, Wholesale Funding
All other Liabilities
Cash, Securities, Debt, Off-balance Sheet Exposures
Bonds, Equities, Gold, Specific Loans
All other Assets
High Quality Liquid Assets
Net Cash Outflow
(30 D Horizon)
Available Stable
Funding (Sources)
Required Stable
Funding (Uses)
BCBS 188: Basel IIIIntern. framework for liquidity risk measurement, standards and monitoring
> = 100 %Liquidity Risk
NSFRRatio:
* Risk Weights could be retrieved from SAP Basel II Credit Risk Solution
© 2012 SAP AG. All rights reserved. 22
Challenges in Liquidity Risk along different dimensions
BASEL III requirementsNew Liquidity Rules under Basel III Moving Target as full Basel III Implementation runs to 2018
Market situationMortgage crisis, European debt crisis, what´s next?Increasing costs for refinancing and liquidity procurement
Organization & processesStrong collaboration between different LoBs requiredChange in liquidity management processes possible
High data volumesCash flow orientation causes huge data volumesHow to handle these volumes for ad hoc steering purposes?
AnalyticsSimulations, predictive analytics, scenario analysis requiredA solution needs to cover compliance, analytics and steering
LRM
Environment
Multidimensionality impacts the entire banking and liquidity arena
Reduzierung des Zeithorizontes
Ut enim adminim veniam, quis nostrud exercitation
Aktualität der Planungsgrundlage mit entsprechend konkreten Zielvorgaben
LIQUIDITY RISK
MANAGEMENT
BASEL III Market
Datavolumes
Analytics
Organi-zation &
processes
LRM@HANA overview
© 2012 SAP AG. All rights reserved. 24
SAP LRM@HANA meets the challenges
Reduzierung des Zeithorizontes
Ut enim adminim veniam, quis nostrud exercitation
Aktualität der Planungsgrundlage mit entsprechend konkreten Zielvorgaben
LIQUIDITY RISK
MANAGEMENT
BASEL III Market
Datavolumes
Analytics
Organi-zation &
processes
Predict liquidity needs on basis of scenarios, simulations and stress testing in real-time
SAP LRM@HANA content supportsBasel III compliance
Intuitive User InterfacesCollaborativeprocesses support holistic handling of liquidity risk
HANA technology allows for intraday processing of large data volumes... in atomic granularity
Stress testing, scenario analysis and simulationsSeamless drill-down from group-level results to individual cash-flows
© 2012 SAP AG. All rights reserved. 25
LRM@HANA –enabling real time Liquidity Risk Management
aggregation of 200+ Mio. cash flows in 1 secondreal time load and analysis
Extreme performance
Open platform for specific models
Ad-hoc simulation and drill down
extensible architecture for modeling of customer specific logicextensive configuration capabilities for complex filtering, aggregation and calculation rules
what-if analysis on behavioral and market parameterssingle contract level including full drill down
© 2012 SAP AG. All rights reserved. 26
SAP Liquidity Risk Management Test Results
290M Cash Flows
<1 seconds
>60 minutes
Standard System In-Memory System
Aggregated & Selected
4000x faster
© 2012 SAP AG. All rights reserved. 27
Product Scope LRM 1.0
SAP LRM@HANA, enables banks to perform real time, high-speed liquidity reporting and risk management on large volumes of individual cash flowsThe application allows for pooling all types of cash flows, including operative, simulated, and stressed data from various SAP and non-SAP source systemsFramework to calculate risk key figures including regulatory requirements like Basel III ratiosUsers can apply basic stress factors to the data, for example to gauge the effect of varying haircut and run-off rates, or the re-classification of certain assetsIntuitive UIs enable business users to analyze and compare scenarios
© 2012 SAP AG. All rights reserved. 28
SAP Liquidity Risk Management 1.0 Architecture
Operational Systems (SAP and non-SAP)
Cash Flow Pool (non-SAP)
Cash Flow Engine
Loans Deposits Securities Derivatives
BI
ETL
SAP Bank Analyzer
SAP Cash Flow Engine/Strategy Analyzer
Netweaver
SAP HANA
SAP Liquidity Risk App
Upload of Stressed / Unstressed Cash Flows for Current and Simulated Business
Comprehensive Liquidity Risk Reporting
High Performance Cash Flow Aggregation and Key Figure Calculations
© 2012 SAP AG. All rights reserved. 29
© 2012 SAP AG. All rights reserved.
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