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“High Performing Financial Institutions and the Keys to Success in an Uncertain Environment”

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Presentation to the Caribbean Association of Indigenous Banks by Peter Hill, Oracle Financial Services Software

“High Performing Financial Institutions and the Keys to Success in an uncertain Environment”

The liquidity crisis

Increasing scrutiny by regulators

The importance of bringing Risk and Finance into decision making

“High Performing Financial Institutions and the Keys to Success in an uncertain Environment”

The liquidity crisis

Increasing scrutiny by regulators

The importance of bringing Risk and Finance into decision making

We describe this as the ‘New Normal’We describe this as the ‘New Normal’

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“New Normal” in Financial Services Transformation Unfolding Now

• Sound risk management must now be embedded in all

decision making processes across the institution

• Risk and performance management, along with accounting

functions, must naturally exist within a common decision

making platform

• Compliance with advancing and more complex regulatory

mandates will trigger a shift in focus from paper

pushing/reporting driven efforts to competitive driver

• Capital adequacy and liquidity risk management will define an

institutions’ ability to not only survive, but thrive, in the “New

Normal” marketplace

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“New Normal” in Financial Services This Transformation Means…

• Operational Risk must play a more prominent and integrated

role at the top of the institution to identify, control and

manage risk and performance issues

• Financial crime and compliance strategies are already

moving from pure regulatory compliance plays to strategic

with increased need for integrated with other risk systems

• CIOs must revisit the nature of supporting data warehouse

architecture strategies as cross functional needs drive major

change and restructuring

• Collection and distribution focused data strategies will

transform into more purpose-built and end use case

approaches

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Ever-Changing Compliance is a Big Issue

6© 2010 Oracle Corporation – Proprietary and Confidential

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Banks Face Many Different Types of Risks

Trading & ModelRisks

BusinessContinuity

LegalRisks

Outsourced and Supplier

Risks

Compliance Risks

FinancialCrime

(AML, Fraud, Rogue Trading)

ProductRisks

MarketRisk

IT Governance and Information

Security

Documentation Risks

Reputational Risks Risks need to be

identified and evaluated.

What controls are in place? Do they work?

What happens in stress scenarios?

Risks need to be identified and evaluated.

What controls are in place? Do they work?

What happens in stress scenarios?

Credit Risk

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Worst-Case Workshop ScenariosIdentify, examine, and consider action about risks at a strategic level:

External threats e.g. competition, loss of key staff, weather issues, terrorism

Temporary issues e.g. loss of electricity, public transport, medical pandemic, IT or communication failure

Market disruption e.g. lack of liquidity, changes in economy

Consider scenarios as:

1. Consider relevance and potential impact

2. Determine necessary action

3. Periodically review

Record outcome of workshops:

Use workshops and a moderator

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ERM & Capital AdequacyLiquidity Risk Management

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ERM & Capital AdequacyEnterprise Stress Testing

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ERM & Capital AdequacyRisk Adjusted Performance Measurement

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ERM & Capital AdequacyRisk Materiality Assessment

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ERM & Capital AdequacyCapital Planning

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A Strategic Approach to the Risk Analytical ChallengeBegin with Firm Foundations

v061510A Financial Services data model, an ‘intelligent’ infrastructure, and a BI reporting layer used to drive all of our risk analytical

solutions representing a one-time investment.

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A Strategic Approach to the Risk Analytical ChallengeThen Add Applications as Required

Uni

fied

Anal

ytica

l Met

adat

a

FINANCIAL SERVICES ANALYTICAL APPLICATIONS DATA MODEL

FINANCIAL SERVICES ANALYTICAL APPLICATIONS INFRASTRUCTURE

FINANCIAL SERVICES BUSINESS INTELLIGENCE

DataSources

DataSources

Reports Alerts Dashboards Embedded

Computations Common Tools Business Rules Stochastic Modeling

Common Objects Common Dimensions Pre-Integrated/ Extensible High Volume

Liquidity Risk

Capital Adequacy

CreditRisk

MarketRisk

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Operational Risk etc.

A one-time investment in analytical and reporting infrastructure that is leveraged by all analytical applications.

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A “Joined Up” IT Strategy Potentially Allows:

• Stress testing of key risks• Scenario analysis to see how ‘prepared’ the organisation is for the ‘unexpected’

event • Satisfy regulators with comprehensive risk assessments across the enterprise • Compliance risk is another type of operational risk• Internal Audit are partners with Compliance Managers with Operational Risk

Managers to ensure compliance with internal standards and external regulations• Failure to comply with AML regulations adequately is a Compliance and

Operational Risk• Fraud and cyber crime are both growing threats

This “New Normal” requires a state of ‘Analytical Transformation’

This “New Normal” requires a state of ‘Analytical Transformation’

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What this means:

• You don’t have to throw out your existing software

• It does mean you need to think whether or not you really have a ‘joined-up’ IT strategy capable of delivering a ‘joined-up’ risk view

Oracle Financial Services Analytical Applications Infrastructure and the necessary applications to fill the gaps

Import DataImport Data Financial data warehouseFinancial data warehouse

The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions.The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.