Agile Financial Times - April 2009 Edition

8/14/2019 Agile Financial Times - April 2009 Edition

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CUSTOMER INSIGHT

SOLUTION SPOTLIGHT

Managing Liquidity

in Tough Times

Nyasha Makuvise

CEO, CBZ Holdings

Cash is King!iDeal Liquidity

AgileFINANCIAL TIMES

April

2009

CUSTOMER SPOTLIGHT

Leading Asset Management Company

Selects Agile FT


2/20


3/20

And here it is! Both Spring and our inaugural

issue that you behold at this moment!

We live in interesting times. A period in history

that will be studied for ages to come. There are

lessons to be learnt and for those who can

understand the opportunity within all the

adversity, its time to plan for a rewarding future

ahead.

We invite you to be inspired by the "lift of your driving dreams". This is

the time when we should take a relook at our systems and processes,

and prepare for the inevitable upswing ahead.

While an enormous spate of activity takes place round the clock at Agile

FT offices across the world in terms of research, product development

and innovation, we wanted to share some of it with you.

We share the joy that we feel in this initiative as it brings us closer toyou and allows us to chat with you - up close and personal. We invite

you to use this platform to share your own perspective, to reach out and

build partnerships within our community of clients, partners and

principals.

So go ahead and read a little, think a lot, get charged even more and

soar beyond glass ceilings and as you do, remember to drop us a

postcard (or an email will do) to let us know how we fared.

Be Agile!

Shefali Khera

Chief Marketing Officer

Write to us at [email protected]

CONTENTS

Editors Note

CUSTOMER INSIGHT

Optimal Insurance Selects

AGILIS 4

COVER STORY

Managing Liquidity in

Tough Times 6

NEWS

Global Update 9

INTERVIEW

Kalpesh Desai 10

SOLUTION SPOTLIGHT

Cash is King! 14

PARTNER SPOTLIGHT

Making Strides in West

Africa 16

CUSTOMER SPOTLIGHT

Leading AssetManagement Company

Selects Agile FT 18

April 2009


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4

What prompted the recent reorganisation and diversificationof the CBZ Holding Company based on client segments andhow has it impacted growth?

The primary motivation for the reorganisation anddiversification of CBZ Holdings Limited was the need toprovide clients with a one-stop shopping experience. Thismeant providing a variety of services and products to clients

within a group. The generic financial services model inZimbabwe was that of a single service provider and weendeavour to be unique in this area.

The intent of the innovation initiative was to provide clients with many products and services within one group, butthrough various subsidiaries. This is why we have a 360degree icon as part of our corporate identity which is aptlycombined with the phrase all round financial facilitator.

The other objectives of our reorganisation were thediversification of income streams, capital and shareholder value preservation. Diversification of income streams

helped us reduce the shocks of major drops of income inone line of business. On the other hand due to the hyperinflationary conditions in the country, it was important topreserve capital through acquisitions of value holding assets,for e.g., real estate. We transformed the Zimbabwe dollartrillions into land & buildings which held better value. Thishelped us to preserve shareholder value and provide us withsteady income.

In what areas has the economic slowdown impacted CBZHolding Company, and how has the company maintained ahealthy position despite the economic slowdown?

The CBZ Group is largely a financial services company.Lending is a major business, with interest income being themain source of income.

OptimalInsurance

Selects

AGILIS

Optimal Insurance Company (Pvt) Ltd, a

subsidiary of one of Zimbabwes largest and

diversified financial services institution - CBZ

Holdings Limited - has shown its commitment

to improving service delivery to its clients by

recently acquiring the rights to implement

AGILIS Core Insurance Software from Agile

Financial Technologies. The new system will

allow Optimal Insurance to automate all its

existing operations and enable them to quickly

create new insurance products thereby

reducing time-to-market.

AGILIS covers the entire spectrum of

operations and finance management for an

insurer including product management and

distribution (policies), underwriting,

reinsurance, claims and accounting. Available

with multi-language and multi-currency support

and consolidated financial information on multi-

currency transactions, its well-defined workflow

covers all the steps of the insurance business

from a single view of the customer profile to

effective management with pre-configured

reports, including MIS.

On this occasion, Nyasha Makuvise, Group

CEO, CBZ Holding Company, shared his

insights on the company and industry, in an

exclusive interview to Agile Financial Times.

Nyasha Makuvise, CEO, CBZ Holdings, signs the agreement with Kalpesh Desai, CEO,

Agile Financial Technologies. Also see standing (from left to right) are RumbidzayiJakanani, Legal Advisor, CBZ; Munya Mateko, Regional Head - Africa, Agile FT; and

Tatyana Chernyshova, Business Development Manager, Agile FT.

CUSTOMER INSIGHT


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The general economic slowdown and the hyper inflationaryconditions in Zimbabwe seriously and adversely affected thecore business of lending. As a result, financial profitabilitywas reduced significantly.

The other area that was affected was the stock market. Within the group we have a stockbroker and an assetmanagement company. Their operations almost came to ahalt and reduced income flows for the group.

What is your outlook on the banking and financial servicesindustry in Zimbabwe?

Globally the banking and financial services is in bad shape.Zimbabwe is, of course, no exception. However, I see abright future for our industry as we are poised for aturnaround. This is mainly because we have been under

sanctions and were somehow insulated from the majorshocks that affected other markets.

As we come out of the isolation with the removal ofsanctions, business should start to improve. Lines of creditavailability should improve and trade will be facilitated. Thiswill benefit the industry; hence my optimism.

On the other hand, I do believe that some consolidation inthe industry will take place. This will be based on the needto improve the capital strength of financial institutions.

Outside consolidation, I also believe that acquisitions,particularly by larger foreign stronger financial institutions, will take place. This will allow for financial strength andstability.

Is the insurance business in Zimbabwe growing and whatare the opportunities for Optimal Insurance moving

forward?

Being a service industry the insurance sector has beennegatively affected by recession, mainly due to the political

climate in the country in the past couple of years. However,we expect business to pick up after the recently pronouncedgovernment of national unity.

The insurance market is a perception-driven market andhence the recent political settlement creates an opportunityfor us to introduce new and improved products ahead ofcompetitors during the transition period. Competition in theindustry is based on service delivery and Optimal Insurancehopes to capitalise on this transition period by being agileand innovative on new products and services. The pre-requisites for this are a robust and scalable technologyplatform to complement the launch of new products, as wellas superior service delivery by improving documentturnaround.

Group synergies make Optimal Insurance strategically

positioned to significantly grow the bancassurance business.The company is also looking forward to capturingagricultural sector business through bancassurance.

A strong shareholder base increases stakeholder confidencein the company, creating an opportunity for it to increase itsmarket share.

Do you believe that the current economic scenario willthrow up any significant challenges for CBZ Holding, and ifso, how do you plan to overcome them?

Indeed at no time in recent times has the term global villagerelating to the world been so real. The general worldeconomic meltdown has affected Zimbabwe and indeed theCBZ Group. This has mainly been through less borrowings,hence diminishing opportunities to raise capital. Our mainfocus is on lending, so if we cannot get lines of credit itautomatically translates to less business.

Developing economies are also largely commodity-driven.The slowdown in the world economy reduces trade andprices of commodities and this adversely affects financialservices.

I believe that this is the time to prepare for a better future,so that when the good times come we are ready. This is oneof the reasons for focusing on putting the right technologyin place.

Why did you select Agile FT as your technology partner?

In our quest to provide superior service and delivery to ourclients, we needed a technology partner who understandsour business as well as we do. Agile FT met that needperfectly.

In addition, the quality and experience of the Agile FT teamgives us a significantly high comfort level that theimplementation will go as planned, and that we will be ableto achieve our goals.

5

Competition in the industry is

based on service delivery and

Optimal Insurance hopes to

capitalise on this transition

period by being agile and

innovative on new

products and services.

CUSTOMER INSIGHT


6/20

Several banks globally have closed down over the past few months, the primaryreason for the failure of these banks being that their lending activity was muchhigher than their deposits permitted. This mismatch between their assets anddeposits led to a shortage of funds for their operating activities. Anothersignificant reason for the downfall of these banks was the US sub-prime crisis,which led to a dry up in the securities buyback markets resulting in a severe cashcrunch.

Banks form the backbone of an economy and when they are affected, the entire

economic activity of a country comes to a standstill. Worse, the domino effectspills over the borders giving rise to the risk of contagion at a global level.Obviously this is not a desirable situation and banks need to examine the reasonsfor this and take concrete steps to ensure that a similar crisis does not recur.

Banking Risks

The traditional activity of a bank involves the business of borrowing (deposits)and lending (loans). Profits are generated by the cost income arbitrage that a bankincurs through deposits and loans respectively. Therefore, the primary risks thata bank faces include credit risk and liquidity risk. The quantum of credit riskprimarily depends on the type of industry and the risks associated with the

industry, which would prevent the borrower from repaying the loans. Liquidityrisk arises out of the inability of the banks to honour their obligations due tonon-availability of liquid funds. This risk is inherent to the general bankingbusiness, and arises out of due course of the banking business. The reason for

6

This article explores

the nature of the

banking business, thedifferent types of

risks involved in the

banking business,

identification,

measurement and

impact of liquidity

risk, and risk

management systems

that can be set up

to prevent a

liquidity crisis.

Managing Liquidity

in Tough Times


7/20

this is the manner in which banks conduct business.Typically banks lend to customers on a long-term basis andborrow on a short-term basis, such as from the financialmarkets. Thus, they keep assets on their books for a longertime and provide liquidity in the short term in case ofcontingencies as well as to cater to the daily cashrequirements, with the assumption that the business willcontinue to refinance itself.

Risk Management

There are a number of risk management systems that can beused to identify, monitor and control risk:

Firstly, the bank needs to identify liquidity risk by classifyingits balance sheet into two classes:

Sticky Assets Core Assets

Sticky assets refer to those assets that cannot be returned ondemand, For example, fixed assets like building andcomputers. Core assets refer to those that can be liquidatedin case of an emergency. For instance, cash with the centralbank, and cash and deposits with peer banks. Clearly, a bankcannot depend on sticky assets for a bailout in case of aliquidity crisis. However, a bank can depend on the coreassets for generating cash in case of an emergency. Thesecore assets should be further classified into CASA (Current

account saving account), collateralized borrowings, long-term loans and so on.

After classifying the assets, banks need to place risk weightsfor each of these assets from highly liquid to less liquid andilliquid.

Thereafter, banks should set up a maturity matrix for bothassets and liabilities, which helps ascertain the maximumnegative outflow within a period of three to six months.This maturity matrix should be defined in terms of a clusterof deterministic items and non-deterministic items.Deterministic items are liabilities or assets with a fixed

maturity period, interest rate and amount (for example, abond with a fixed maturity period, coupon rate and amount).Non-deterministic are assets or liabilities with unfixedamounts, interest rates and maturity period (for example,LIBOR-linked securities, callable bonds and put options).

Once the maturity matrix is set up, the banks should identifyand assess the liquidity attached to various assets andliabilities on their balance sheets. Banks need to establishscenarios at various levels (such as at the organizational level,local bank system level and international level) and test howthese items are affected in a given situation. For example, at

an organizational level when a banks current accounts arebeing called, deposits are being withdrawn; peer banks orothers hold and cannot offer liquidity, the question to beasked is how will the bank generate cash for its operations?

At this point of time, the bank should be able to identify itspossible liquidity issues and therefore establish preventivemeasures to steer clear of the same. These simulatedscenarios help a bank prepare for contingencies. Similarly,situations or scenarios for the other levels can be simulatedand tweaked in accordance with the changing environment.

Once the scenarios are identified, banks should put themthrough a stress test. Here banks would normally follow twotesting techniques:

Historical Value at Risk: Historical Value at Risk can bearrived at using normal distribution and events method where-in the worst possible scenarios and events areassumed to have taken place and then its effect on the

liquidity is calculated. Example of such events includesfailure of banks to borrow, dipping share prices etc. Balance Sheet Liquidity: Balance Sheet Liquidity puts to

test the banks ability to raise finance in a short period oftime. This assumes the shortest period within whichliquid assets can be sold in the market and funds can beraised from market makers and brokers. In order tomake this possible, banks align the assets in accordance with the level of their liquidity. Banks refer to thebalance sheet items in terms of the degree of theirliquidity. For example, a committed line from otherbanks is considered as a percentage of short termunsecured obligations. The higher the percentage, the

higher the liquidity.

Based on scenarios and testing techniques, banks can evolvestrategies to ensure that liquidity is available for dailyoperations (the amount of negative outflow limits) and on along-term basis (align the deposit and asset side with thelong term goals).

Once the strategy is defined, the bank should set up aLiquidity Continuity Plan (LCP) that can identify points ofcash limit breaches and measure how a bank can resolve thesituation. Banks should establish clearly documented

processes that explain the steps to be followed in case of aliquidity contingency event.

The LCP should be made known to the large customers,

7

COVER STORY

Most banks and financial

institutions fail due to the

under-pricing of liquidity

risks, rather than a credit

risk due to aggressive selling.


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creditors and stakeholders. In case a bank does not doso, lack of information at the critical time can lead to acrisis. Banking is a business of confidence and it iscritical that the same 'language' is spoken across variouslevels. Lack of synchronisation between various levelsof management and stakeholders can further fuel thecrisis. Hence, it is critical to keep all stakeholders well-

informed.

Taken together, these steps should hold banks in goodstead while managing their liquidity risks proactively.

Conclusion

Liquidity risks have very long-standing effects, not onlyfor the bank, but for the country and economy as awhole. Hence central governments of many countriesstep in to bail out ailing banks in a liquidity crisis

scenario. However, banks should not use this as asafety net and fall prey to the moral hazard it poses.

Liquidity risk negatively impacts both sides of a bank'sbalance sheet, the assets and the liabilities. Assets areaffected, as bank's borrowers default in repayment ofloans resulting in a funds shortage. Similarly, liabilitiesare impacted because depositors do not invest in abank that is facing a liquidity crisis.

Most banks and financial institutions fail due to theunder-pricing of liquidity risks, rather than a credit risk

due to aggressive selling. Regulators and thegovernment need to ensure that financial institutionsmaintain a sufficient level of liquidity to meet sectoralneeds and sustain the level of liquidity in the market.

8

COVER STORY

LIQUIDITY RISKS

The recent fallout of major banks re-iterated the fact that

liquidity risk has a strong bearing on the world economy.

Structured Liquidity Risk (SLR) is defined as a risk

undertaken in a conscious manner to generate cash and

maintain assets on a long-term basis. It is termed structured

because it is well-known and it is undertaken in a planned

manner. For example, banks need to pay taxes on a specific

date, and earmark a certain portion of their funds for this.

Contingent Liquidity Risk (CLR) is concerned with assets

and liabilities of a bank that typically have a long-term maturity,

some examples of which include term deposits, offshore

products and guarantees. Although this is part of the daily

banking business, the possibility of these getting liquidatedprior to their maturity poses significant liquidity risk. For

example, a term deposit with a maturity of five years may be

liquidated by the depositor at the end of the third year.

Similarly for offshore products like guarantees, if called upon

at any point in time, the bank has to honour the financial

obligations. When banks fail to honour their financial

obligations, it can result in consequences like bad publicity, run

on banks, breach of depositors trust, and degradation of the

banks credit rating. Numerous situations of the same type can

give rise to shortage of funds. Such cases occur when there is

a high amount of market volatility, which gives rise to market

liquidity risk.

Market Liquidity Risk (MLR) is the third type of risk and

works on the assumption that markets operate in a normal

condition and have sufficient liquidity levels. In case money is

insufficient in the market, it results in shortage of funds and

eventually leads to a collapse of the financial system. For

example, most banks undertake inter-bank lending and

borrowing activities, which allows them to avail money to fulfil

their financial needs. However, in case of the current financial

crisis the inter-bank lending markets had dried up and a

shortage resulted in the markets getting tightened.

The market volatility was so high that the indigenous and

endogenous risks led to a severe cash crunch in the market.

For example, the mortgage-backed securities markets dried

up completely and banks were unable to liquidate their

securities through re-pledging, which led to panic. Similarly,

when banks could not raise finance to meet their contingent

and structured liquidity requirements, rating institutions started

downgrading their ratings. In addition, borrowers started

demanding their loans. All these events had a cumulative

effect on banks getting hit with substantial pressure from all

stakeholders. Banks were unable to approach the market to

raise finance through certificate of deposits, commercial paper

or assets of similar classes, with Lehman Brothers being aclassic example that suffered the consequences of being

unable to create liquidity when required.

Liquidity risks have very

long-standing effects, not

only for the company, but

on the country and

economy as a whole.


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9

NEWS

Leading UAE Banks to Convert State Deposits to

Capital: Leading UAE Banks such as Mashreq, RAK Bank,NBAD, Emirates NBD have recently announced theirintention to convert federal government deposits intoregulatory capital. This is to improve asset quality and offsetthe impact of global credit crisis on the domestic bankingindustry. Most of these deposits will be converted to Tier 2

capital for effective risk mitigation.

Brazil Plans to Reduce Spending Due to Financial

Crisis:As a result of the financial crisis, revenues from taxcollections in Brazil recorded a significant fall. Thegovernment is now taking measures to curb the impact oflower inflow of funds. Guido Mantega, Finance Minister ofBrazil, announced a reduction in current expenditure andtighter fiscal policies to reduce the mismatch between lowertax collections and high fiscal expenditure.

Qatar Central Bank to Replace 1.2 Million ATM Cards:

Qatar Central Bank heads told all banks in the Gulf state to

change 1.2 million ATM cards with chip and pin technologyto smart chip cards technology within seven days. The aimof this move is to offer greater protection to clients fromprospective hackers and ATM fraud. While it will enhancesecurity, it will also offer greater inter-operability .The bankssent SMS messages to clients informing them about theirATM card replacement move.

Sharia Banks may Impose Fees to Issue Guarantees:

According to religious scholars, Shari'a banks should bepermitted to impose a fee for issuing guarantees as itinvolves a transfer of risk to the bank. Supporting this,

Mohd Daud Bakar, advisor, Accounting and AuditingOrganisation for Islamic Financial Institutions (AAOIFI),stated that the nature of transactions for guarantee issuancehas evolved from a family transaction (earlier guarantees

were issued between family members, whereas now they areissued to unknown parties) to a financial product issued tothird parties. Similarly, opinions about imposing fees onguarantees are undergoing a change and many banks havealready started charging fees for guarantee issuance.

Citigroup to Expand in South East Asia: Citigroup is

believed to be looking to open more branches in Thailandand starting equity brokerage businesses in Malaysia,Vietnam and Indonesia later this year, in an overall plan toexpand in Southeast Asia. This signifies that Citigroup,which has been affected by huge losses in the United Statesdue to the real estate market collapse, is now banking onAsia to bolster its business.

Yemen Plans to Approve Modified Investment Law:

Salah al-Attar, head of the General Investment Authority(GIA) stated that the Yemen investment law was undergoingmodification. The modification involved a decrease inincome taxes charged on companies from 35% to between

15-20%, customs exemptions and the amendments of theGeneral Investment Authoritys board of directors (nowcomprising 50% public sector employees, and remainderfrom the private sector).

Indian Public Sector Banks Cut Rates: Indian bankshave begun reducing deposit and lending rates after theReserve Bank of India announced a 50 bps cut in repo andreverse repo rates. Three public sector banks viz., Bank ofBaroda (PLR-12%, down 50bps), Union Bank of India(PLR-12%, down 50bps) and United Bank of India (PLR-12.5%, down 50bps) have reduced their rates. The rate cut is

expected to encourage banks to offer credit for productivepurposes at feasible interest rates. However, private sectorbanks such as ICICI Bank and HDFC Bank have yet todecide on the rate cut.

Global

Update

A quick review of industry news fromaround the world.


10/20

10

The BFSI industry is in a challenged state today due to theglobal financial crisis. Where do you see the industry goingfrom here?

Those who fail to learn from past failures are bound toreplicate it - the current state of the financial services sectoris a perfect example. As past experience fails to guide futurebehaviour, banks and financial institutions across the globefind themselves unable to understand what actuallyhappened. Overwhelmed by the sheer volume of lendingactivity, many banks opened themselves up to tremendousrisk - for which they now are paying the price.

The current crisis facing the global financial services sectorcan be attributed to the contracted liquidity in global creditmarkets and banking systems triggered by the failure of

mortgage companies, investment firms and governmentsponsored enterprises which had invested in subprimemortgages. The crisis, which became more visible

InterviewKalpesh Desai

CEO, Agile Financial Technologies

Kalpesh Desai, founder and CEO of Agile

Financial Technologies, envisioned the creation

of an unparalleled enterprise that would be a

technology partner to leading players in the

BFSI sector enabling business agility. He

formed Agile FT by acquiring and merging

strategic software products and technology

companies in the space of software solutions,

technology services, BPO and KPO.

Kalpesh has over two decades of experience

in spearheading technology companies to

achieve and sustain a position of market

leadership and organic growth. He has earned

a reputation of creating and building

successful, scalable enterprises by defining

and converting corporate vision into strategic

intent and coordinated action. A firm believer of

producing results through people, he has

attracted and retained talented people.

He brings a deep understanding of

businesses having held multiple roles in

executive management, product development,operations management, sales and

marketing management.

INTERVIEW


11/20

throughout 2007 and 2008, has exposed persistent weaknesses in the global financial system and regulatoryframework.

We believe that the domino effect of what happened to sub-prime will now impact the prime markets. There will befurther write downs in the global financial industry, withinvestment firms taking mark to market losses and bankswriting off non-performing assets over the next quarter dueto rise in unemployment, lay-offs and pressures due torecession in the most economies. In the new economy,nobody is isolated from the crisis and global liquiditycontraction is bound to put pressure on financialinstitutions.

The BFSI sector as we know it has changed its outlooksignificantly. Emerging markets will become the new

powerhouse considering that these economies have workedunder stretched circumstances already and are in a positionto adapt to change quickly. Most emerging economies havealso been more or less isolated from exposure to complexfinancial instruments like derivatives and have been investingin fundamental businesses.

Institutions will be challenged to manage customerexpectations, increased regulatory oversight, contractedliquidity and a deteriorating quality of assets all at the same.

Current IT systems that were deployed in the "good times" were designed to function and deliver to a context thatperhaps isnt relevant today. It is imperative that systems thatfocus on liquidity, capital conservation and growth of capitalneed to have deep functionality with extensive risk and limitmanagement capabilities. Institutions will have to give a lotmore focus to moving risk management upstream to theirfront office, and examine the possibilities of working withservice providers who can undertake to manage their midand back offices. This will allow customer centricity, productdevelopment, quality of assets and capital adequacy to comeinto focus and enterprise risk management will shift its role

to bring about a tighter integration with the business.

Do you think that even in the current downturn, possiblegrowth opportunities exist for BFSI companies? What have

been the primary challenges in addressing theseopportunities?

In the current downturn, BFSI companies have increasinglynew roles to play. The institution with the ability todemonstrate responsiveness, turnaround times, transparentreporting and effective advisory services will be well placedto retain and attract customers.

Insurance companies will see a demand in clients who havemade investments desirous of securing their assets. Longterm insurance (Life) is also expected to see an anticipatedrise in demand.

Cash is now King. Liquidity management is of paramountimportance to institutions since their liabilities have typicallyshorter maturity periods than their assets. Banks facing a

reduction in their depository base have been forced toleverage and any capital expenditure should be viewed withconcern. The system is under pressure and financialinstitutions have new challenges in establishing a balancebetween growth and survival.

The differences between the business and the IT teams ofthe financial institution become more acute in thesecircumstances and the challenge is to ensure business agilityin an environment that is straddled with inflexible

applications, islands of information, multiple interfacepoints, tedious product development, succession planningimperatives and lack of research.

What kind of role do you think technology can play inaddressing these challenges?

In the current situation of global economic slowdown andliquidity crunch, a re-orientation of technology plans ofbanks and financial institutions has to take place whichneeds thorough preparation on the part of the institutions.Only that technology platform, which offers a low total cost

of ownership, can contribute to business growth quickly,and which at the same time can help banks to reduce theirregulatory compliance burden and costs, while improvingtheir business processes, customer retention and growth, is

11

INTERVIEW


12/20

likely to be considered in the short to medium term.

Given the enormity of the crisis, risk managementtechnology will be a key industry focus for the next three orfour years. While firms have invested significantly in theirrisk infrastructure over the past 10 years, significantinvestment and modifications to the existing infrastructure will be made. To provide the chief risk officer with theappropriate risk infrastructure, firms will augment their Value at Risk (VaR) framework modeling to embracescenario analysis. Enterprise risk management platforms will become the need of the hour as market, credit andoperational risk management become more essential inrunning a modern financial institution.

Diversified financial groups will revamp the way to look atcustomer centricity around their cash & liquidity

management, mortgage finance, wealth management, asset

management, broking and insurance services. Applicationswith deep functionality in these areas and the ability to berapidly implemented will see more increasing demand.

Two other key technology initiatives will becomeincreasingly important as firms revamp their platforms.First, normalising and validating data across the enterprise will become critical. Grid, cluster and virtualization willbecome more common within as institutions look atconsolidating their resources within a central processingplatform. Secondly, institutions will look for technology

partners who can service them holistically, instead of justsoftware product vendors or point service providers.

Margins for BFSI companies are under severe pressuretoday. How do you think this will impact their technologydecisions?

Banks, both small and large, are under tremendous pressureto tighten their financial belts. Consequently, they areconsidering efficient ways of managing internal costs,particularly with respect to their IT applications.

As capital markets firms recede, reorganise, and seek safeharbours, IT spending and priorities are coming into focus.Financial institutions, across the world, are considering theircompetitive position, capital base, and growth prospects.

Platform enabled outsourcing services is emerging as thedefinitive IT model for many banks as they strive to loweroperational costs to ensure a high return on investment.This can be defined as the ability of an outsourcing vendorto provide its services around functionality rich applicationsoftware platforms that are used for fulfillment anddissemination. Platform enabled outsourcing is likely toexperience tremendous uptake in the coming months,especially in the wake of the current credit crisis. Financialinstitutions should, therefore, take advantage of the benefitsthat can be sought from this model in order to stay ahead ofthe competition and drive innovation.

Do you see any particular trend in terms of businessrequirements from BFSI companies? Have you noticed anysignificant change over the last 5 years?

An increasing number of financial institutions have beenusing the software as a service (SaaS) model. The financialservices sector is one of the largest industry users of SaaS.However, most of the current financial services SaaSdeployments are CRM applications. But in the wake of thecurrent market scenario, large asset managers and brokershave been increasingly using certain types of non-CRM SaaSofferings. In the risk and compliance space, there has beenan upswing for vendors offering hosted applications andfinancial institutions willing to use such services. SaaS-delivered risk and compliance applications include corporateactions, approval mechanisms for complying with customer

regulations and anti-money laundering applications.

Many large institutions are increasingly using SaaS for wealthmanagement advisory functions; they take these on a needbasis from large clearing providers and wealth managementsoftware providers. Such arrangements are a good fit forinstitutions that have agent networks of 10,000 or morefinancial advisors.

IT managers of financial institutions also face innumerablechallenges as business needs have been extremely defined,and existing systems that have been loosely coupled togetherare unable to cope with demands from business. Customers

have become very demanding on security issues. Informedand tech-savvy customers expect financial institutions tohandle remote deposits, nationwide ATM and debit cardservices, online banking and electronic bill payment frommultiple physical and digital locations. As a result, frauddetection & prevention, regulatory compliance and ID &data security issues have become as mission critical for theCIO as managing the operations infrastructure.

In the current economic scenario, financial institutionsworldwide are opting for SaaS to reduce IT costs and predicttheir IT spending. Banks can reduce the total cost of

ownership (TCO) for IT by outsourcing the hosting ofapplications. Through this, banks are able to significantlyreduce the implementation costs which otherwise wouldhave been higher for custom built solutions. Banks save on

12

Financial institutions, across the

world, are considering their

competitive position, capital

base, and growth prospects.

INTERVIEW


13/20

time and money as most of the risks of selecting andimplementing new applications are avoided.

The decision to implement SaaS for small and medium-sizedbanks helps them to gain access to flexible softwareapplications that they traditionally have not been able toobtain. SaaS enables banks to benefit from the highlyspecialised applications at minimum cost and maintenancefee. Smaller brokerages, fund managers and assetmanagement firms have a much easier time integrating datafrom different applications with hosted services-orientedapplications than their larger counterparts. SaaS alsoprovides increased flexibility in responding to changes indemand as well as seamless product enhancements, therebyallowing financial institutions to concentrate on providingbetter customer service to their customers.

Corporate clients can also benefit from SaaS. Financialinstitutions offer online web-based cash managementservice to corporate treasurers which can help them toautomate and consolidate their financial processes by havingcomplete access and control of their financial activitiesthrough the banks online cash management tool.

The biggest obstacle to SaaS in large firms is integration -integrating hosted Web services with back-end data storageand legacy systems. Although SaaS offerings can integratewith other programs, they operate more efficiently when thedata is in the SaaS providers data centre. Security is another

issue to be dealt with.

From Agile FTs perspective, opportunities will span fromthe smallest and the most cutting-edge, to the largest and themost secure. During times of crisis, firms traditionally cutback on IT spend, centralise development and operations tocut down on redundancy and look to outsourcing to reducecost and thus focus on core deliverables. Our delivery modelwill enable our clients reduce the cost of core technologies(traditionally provided by larger vendors) and cut back onnewer, riskier technologies (traditionally provided by smallervendors).

CEOs of financial institutions are taking the rein alongsidethe Chief Information Officer since the need of the hour isnot just the technology required to run the business, but tostep into identifying what needs to be centralised,outsourced and managed by an outsourcing serviceprovider. Thus a change of mindset is in the air - towardsthe adoption of platform enabled services adoption.

We understand that a certain loss of control and having athird party handle the IT infrastructure and the operationscan be a little un-nerving for any financial institution. Hence,alongside the cost and time efficiencies and a pay-on-

consumption pricing model that is simple and attractive, wedifferentiate our delivery model by basing the same on thefoundation of operational risk management, thus innovatingon how we deliver our software platform and operational

outsourcing services, and creating a differentiator forourselves.

What are your plans for Agile FT over the near-to-mediumterm?

Agile Financial Technologies provides business enablementservices wrapped around its software products platform. Weservice businesses of financial groups that focus on theconservation or growth of capital. Our software productsrun the core businesses of investment management firms,finance companies and insurance companies. We have the

ability to provide financial institutions not just the software,but managed services around their technology infrastructureand the ability to take on the outsourced functions of midand back office operations. We have a distinctive advantage

by uniquely being able to provide an integrated offering.

Our focus in the near to medium term is to target emergingmarkets in Latin America, Africa, Eastern & Central Europe,Middle East, South Asia and some parts of APAC. Weidentify and enable partners to operate as extensions ofAgile Financial Technologies and hence are able to garnermarket information quickly and rapidly and delivery locally.

We are young, nimble and our agility is drawn from the yearsof experience that the constituent companies that have nowbecome part of Agile Financial Technologies bring to thetable.

Our belief is that to better service our clients, we need tothink, act and behave like them. We treat clients with thesame deep respect that a financial institution would treattheirs. We deploy systems and build products with a focuson flexibility, adaptability to change, and most importantlyusability. Our outsourcing process inculcates the sameoperational risk management parameters that an institutionwould look at whilst deploying its own central processinginfrastructure.

With a delivery model that seeks to differentiate itself from

other service providers, and the ability to reach and serviceclients whose needs are very, very different in the emergingmarkets, we believe we will create a niche for ourselves inthis industry.

13

INTERVIEW

A change of mindset is in

the air - towards theadoption of platform

enabled services adoption.


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14

SOLUTION SPOTLIGHT

iDEAL LIQUIDITY

The two keys to good liquidity management are:(a) to ensure that the regulatory norms of the country are

adequately met, and(b) to ensure that treasury has a good technology system that

can help them model scenarios and track transactions ona real-time basis.

iDEAL LIQUIDITY from Agile Financial Technologies is acomprehensive straight through processing (STP) liquiditymanagement system that integrates the front office, midoffice, back office, banking and accounting processes of anybank. It comprises iDEAL FINANCE, ALM and RiskManagement. iDEAL Finance helps banks in smoothlymanaging multiple outstanding loans or borrowings andgenerating future cash flows and MIS reports with minimalmanual intervention. The Asset and Liability management(ALM) component manages exposure. The riskmanagement component is designed to manage net worthby risk management, capital management and liquidity

management.

The solution covers the following base product classes, withscalability to handle new product structures as the marketevolves:

Commercial Papers Deposits Term Loans Floaters Non Convertible Debentures

The key features of iDEAL Finance are that it can manageasset as well as liability products, supports multiple productstructures, supports fixed/floating loans, simple as well ascompounded interest payment, hybrid loans, options

Cash is King!

The success or failure of a financial institution

is determined by its ability to remain liquid and

yet prudently invest money and lend judiciously

to make profits. Most financial services

companies borrow short and lend long, and at

the same time, must not remain too liquid

because cash does not yield interest and

resultant profits. Many have failed in the past

because of irregular asset and liability

management practices.

A treasury function in a financial services

company is in charge of raising finance for

funding the business, taking care of short term

cash management and managing liquidity

required for operations. What the perfect

system must do, therefore, is take into account

the complex transactions that a treasury offinancial services company performs in its

lending and record and track these

transactions.

The system must also simultaneously keep

track of the cash position and adequately

provide for the day-to-day operations of the

treasury and generate accurate and regular

MIS reports for the management. All this must

be done in a scalable fashion applying themandated regulations that exist so that the

cash ratios are maintained.


15/20

(put/call), stubs, termination, transfer out, rollover andadjustment entries as well as ad-hoc principal repaymentsagainst outstanding contracts.

The system supports multiple currencies and can providedynamic generation of future cash-flows with an option tooverride.

Most importantly, the software is flexible and easy toconfigure and has built-in features that take care of event-based charge definition (stamp duty, brokerage, taxes) andcharge on charge (taxes on brokerage, service tax).

iDEAL Finance for liquidity management allows treasurersto transact in a real-time environment and generatemeaningful reports relating to their transactions. The systemhas interfaces that allow upload, addition or modification of

benchmark values and also to upload/store beneficiarypositions for outstanding non-convertible debentures.

Managing Loans and Borrowings

This is a crucial function of the treasury. Using the iDEALFinance module, they can place and withdraw loans in full orpart as well as track multiple linked loans. The system allowstreasury function to generate and estimate future cash flowsas well which gives them a forecast in line with the liquidityneeds of the financial institution.

The system also has a settlement book that maintainsscheduled cash flow information. This allows marking cashflow as principal redemption, interest payment orbrokerage payment as realised, redeemed either fully orpartially, capitalised interest, realised schedules/unscheduledcash flows and calculate interest accrual and event basedcharges.

Managing Banking & Accounting Transactions

The banking and accounting module helps in trackingappropriation, payments and receipts and provides acomprehensive and reconciled view of the accounts. The

accounting engine can also be configured to generatevouchers and accounting statements as required.

Administering Users

iDEAL Finance allows for easy administration of usersthrough a centralised console. Every user has a secure andunique login id to the system and access to the system isdefined based on his function, role, and authority in theorganisation.

Generating MIS Reports

iDEAL Finance has the ability to intuitively generate avariety of reports that are required by different executives inthe management from time-to-time.

15

SOLUTION SPOTLIGHT

Asset Liability Management

The Asset Liability Management (ALM) solution from

Agile Financial Technologies is comprehensively

designed to manage intermediation risk and the net

worth of the institution by tracking risk, liquidity and

capital. It provides a complete and dynamic decision

framework of measuring, monitoring and managing

liquidity and interest rate risks by uploading enterprise-

wide asset and liability portfolios.

In the normal course of operations, financial institutions

are exposed to credit and market risk in view of the

asset-liability transformation. They are required to

periodically determine their own interest rate on

advances and deposits, subject to the ceiling on

maximum rate of interest they can offer on deposits, on adynamic basis. Intense competition coupled with

increasing volatility in the interest rates brings intense

pressure on banks and financial institutions to maintain a

good balance among spreads, profitability and long-term

viability.

The quest for profitability and sustenance exposes these

institutions to several major risks - categorised as credit

risk, market risk and operational risk - which emphasises

the need to address these risks in a structured and

comprehensive manner.

It is important for financial institutions to base their

business decisions on a dynamic and integrated risk

management system and processes driven by corporate

strategy. In this context, Agile FTs ALM system is

designed to serve as a central system for analysing,

monitoring and simulating the balance sheet and aid in

enterprise wide risk management.

The key features of the system include:

Comprehensive reporting and analysis.

Data management module for integration with legacy

databases and retrieval and processing of branch data.

Identifying funding gaps and estimating pre-payments.

Standard analysis for assets, liabilities and integrated

ALM analysis.

Interest Rate Sensitivity and Net Interest Income.

Facility to bucket non-performing assets as per the

guidelines set by the regulator.

Enhanced risk management functionalities via analytical

techniques like duration gap analysis and market value

calculations.


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Bade Aluko, ManagingDirector, FASYL, shares histhoughts with Agile Financial

Times:

What is the strategic rationaleof your partnership withAgile FT?

Agile FT follows a proactiveapproach while meetingcustomer needs compared toother partners who follow a reactive approach. They have ahigh level of responsiveness to the company expectations aswell as the customer demands.

In addition, Agile FT provides a suite of products andservices that complement our current offerings and enablesus to meet customer requirements.

With the current economic scenario, what will be the impacton partner relationships?

The current economic downturn is not going to significantlychange the role of partners. Partners with a long term viewsurvive an economic crisis as their prime focus is not only tohave quick profits, but to align goals with the partnercompany in order to meet customer expectations.

Thus, I believe that short term partners will perish whereaslong term partners will continue to service the clientseffectively.

16

PARTNER SPOTLIGHT

Finance Application Systems Limited

www.fasylgroup.com

Finance Application Systems Limited (FASYL), a Nigeria-based information technology company, was founded in1998, and primarily offers specialist support services forenterprise and finance applications & software systemswithin areas of product sales, implementation, support andtraining. In addition to this, FASYL also providesconsultancy services for the finance and telecom industries.

While the companys operations extend across Asia, Africa,Europe and the UK, its main focus is primarily pan-Africa.

FASYL also has offices at Mauritius (slated to become thefuture group headquarters), Nigeria (to become a regionaloffice), Ghana, Sierra Leone, South Africa, UK and India.

The company, which currently has a staff strength of 120,also plans to set up offices at Cote dIvoire, Kenya andAngola in 2009.

Key Clients

FASYLs clients include Union Bank of Nigeria, AccessBank, Intercontinental Bank, Diamond Bank, Skye Bank,

Ecobank Group, Sierra Leone Commercial Bank, FirstSecurities Discount House Limited, NEXIM Bank, UnitedBank of Africa, First Bank, Bank PHB, Fidelity Bank andSpring Bank.

Making

Strides in

West Africa

A listing of key Agile FT partners from

West Africa


17/20

The financial services industry is undergoing a change; howwill this affect client requirements and buying decisions?

Banks are undergoing change due to the customerdemand for better and faster banking services. There issignificant competition amongst banks and hence they haveto rely on technology to gain a competitive edge. Customerexpectations are increasing manifold. The nature of servicesdemanded by banks is changing drastically from the manualmode to a technological platform where banks arecompeting to provide faster and improved service to itsclients. Similarly, the changing banking services are givingrise to a need for newer and better technology platforms tomeet the changing customer needs.

17

ExpertEdge Software & Systems Ltd

www.cwlgroup.com/ee

ExpertEdge Software & Systems Limited looks at Agile FTsiDEAL suite of investment & banking solutions. Itsbusiness focus includes software development &deployment, systems analysis, design & implementation andsmartcard applications. In-house expertise of providingimplementation, support and training was the key reason for Agile FT to choose ExpertEdge to provide first levelsupport to its customers in Nigeria.

ExpertEdge Software & Systems Limited, headed by James Agada, is the software subsidiary of the ComputerWarehouse Group, one of the fastest growing IT companiesin West Africa today.

Computer Warehouse Group (CWG), an information andcommunication technology company, provides integratedsolutions to its clients. Apart from ExpertEdge, the groupconsists of two more subsidiary companies:

Computer Warehouse Limited (provides supply andmaintenance of computer hardware and ancillary

equipment)

DCC Satellite & Networks Limited (offers VSAT,metropolitan area network, wide area network, systemsintegration and network monitoring and managementsolutions).

The company also provides training to IT professionalsthrough its ExpertEdge Training Centre. The primaryindustry verticals serviced by the company include bankingand telecom.

Key Clients

A partial list of key clients includes First Bank of Nigeria,Union Bank of Nigeria, Nigeria Aviation Handling

Pacific Solution and Technologies

www.pacificsolutiontech.com

Pacific Solution is a system integrator founded with anobjective to provide solutions to West African countries.The company provides hardware, security, software andcommunication services to its clients. Pacific Solution is

essentially the information technology arm of the BudhraniGroup of companies, which has a global presence. Thecompany has offices in Nigeria, Ivory Coast, UAE (Dubai),UK, Malaysia, Singapore, Indonesia and India. The keyindustry verticals serviced include banking, insurance,internet service providers, telecom operators, governmentand corporates.

Key Clients

Pacific Solutions clients include Sterling Bank, Royal UnitedNigeria, Mikano International, Jubilee Brothers, Somotex

Nigeria, Critical Rescue International, Reliance Textile,Millenium Furnitures, Hansbro Group, Park n Shop Retail,MTN Nigeria, Multilinks Telecommunications, GLOMobile, Celtel , Lagos Metropolitan Area andTransportation Authority, Nigerian Postal Service, IndustrialGeneral Insurance, Linkage Assurance, Unic Insurance,Michael Stevens Consulting and Standard Life Insurance.

Jeetu Hira, Head - Pacific Solution, speaks with AgileFinancial Times:

In what areas of business and technology do you share apartnership with Agile Financial Technologies?

Pacific Solution and Technology is representing Agile FT fortheir Insurance application. We are offering to the marketboth, the product as well as the outsourced model of Agilis,the Insurance suite from Agile FT comprising Life, Non-Life, Health, Takaful, BancAssurance, Broker among others.

What is the key benefit of this partnership and how has itimpacted the way in which you service your clients?

There is a long standing relationship between themanagement of Pacific Solution and Technology Limited

and that of Agile FT. We are bringing a blend of both, thedomain knowledge of Agile FT, and the geographic and the vertical industry knowledge of Pacific Solution andTechnology.

PARTNER SPOTLIGHT

Company, African Petroleum, Adeniran Ogunsanya Collegeof Education, Ghana Telecom, British American Tobacco,and Multilinks.

Besides Agile Financial Technologies, they work closely withInfosys Technologies and Oracle.


18/20

18

CUSTOMER SPOTLIGHT

Leading AssetManagement

Company

Selects Agile FT

The Asset Management Company (AMC) offers investors awell-rounded portfolio of products to meet varying investorrequirements and has a presence in 120+ cities across India.A key business driver for the fund manager is the companysconstant endeavour to launch innovative products andprovide proactive customer service to increase investorvalue.

In line with this philosophy, the AMC wanted to automate

its asset management operations, achieve seamlessintegration across the front, mid and back-office, offer acomprehensive range of fund management products to suitthe investors needs and inclinations and provide exposureto multiple asset classes like equity, bonds, mutual funds,deposits, equity derivatives and interest rate derivatives asalso commodities like gold. More importantly, the fundhouse also wanted to maintain a strict vigilance on limits andexposures in line with its internal governance requirementsas well as in keeping with the norms of the securitiesexchange regulator.

In this context, Indias top Asset Management Company

chose iDEAL Funds from Agile Financial Technologies tomanage its funds and investor portfolio. Apart from morethan adequately meeting the requirements of the fundhouse, iDEAL Funds was also identified as a platform tohandle huge transaction volumes and cater to the largeinvestor base of the fund. In addition, the system integrated with third-party price feed systems to provide valuationacross markets, and also with register and transfer (R&T)platforms, business intelligence systems, equity straight-through-processing and custodial files.

iDEAL Funds generates timely and key management reports

and has a biometric scanning security system for users. Mostimportantly, the system has proved to be resilient andscalable and hence supports the organisations expansionand growth strategy.

One of the fastest growing and

largest mutual fund company in

India that is part of a large

Indian conglomerate chooses

iDeal Funds from Agile

Financial Technologies.


19/20

www.agile-ft.com

Views expressed in this publication do not necessarily represent the views of Agile FT and the information contained herein is only a brief synopsis of the issues discussed herein. Agile FT makes

no representation as regards the accuracy and completeness of the information contained herein and the same should not be construed as legal, business or technology advice. Agile FT, the authors and

publishers, shall not be responsible for any loss or damage caused to any person on account of errors or omissions.

Agile Financial Technologies

808-A, Business Central Towers

TECOM, Dubai Internet City

P.O. Box 503007

Dubai

United Arab Emirates

Tel: +971-4-4331825

Fax: +971-4-435-5709

Agile Financial Technologies Pvt Ltd

701-A, Prism Towers

Mindspace, Malad (West)

Mumbai 400064

India

Tel : +91-22-42501200

Fax: +91-22-42501234

Agile Financial Technologies Pte Ltd

20 Cecil Street, #14-01

Equity Plaza

Singapore 049705

Tel: +65-64388887

Fax: +65-64382436


20/20

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Agile Financial Times - April 2009 Edition

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