9 28554 09 SoH Banking Factbook En

8/9/2019 9 28554 09 SoH Banking Factbook En

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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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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:




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.




5

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

http://en.wikipedia.org/wiki/Basel_Committee_on_Banking_Supervision

http://en.wikipedia.org/wiki/Basel_Committee_on_Banking_Supervision




6

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




7

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




8

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




9

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*

http://download.sap.com/download.epd?context=DC8E394DD7C3580AEA68DC83A85FF50FA413B53326411775A80973B0CCEF68E720B7CFB1E973609B5CFE4C4E97FDE72265FBD511D02A3F84DCE62D0F5B2BB16A25EF80F1F2C7A07A

http://download.sap.com/download.epd?context=DC8E394DD7C3580AEA68DC83A85FF50FA413B53326411775A80973B0CCEF68E720B7CFB1E973609B5CFE4C4E97FDE72265FBD511D02A3F84DCE62D0F5B2BB16A25EF80F1F2C7A07A




10

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.




11

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




12

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




13


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.




14

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.




15

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!

http://help.sap.com/fra

http://help.sap.com/fra




16

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




17

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




18


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




19

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




20

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




21

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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9 28554 09 SoH Banking Factbook En