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Major European Banks Take Latest Risk Management System

SAS : 17 June, 2011  (New Product)
SAS has upgraded its risk management system to cater for the latest regulatory requirements Basel III and Solvency II to enable European banking clients to maintain regulatory compliance and manage risks

To address evolving risk management practices and regulatory requirements, such as Basel III and Solvency II, SAS has ramped up risk management solutions for both banking and insurance with enhancements to SAS Risk Management for Banking and SAS Risk Management for Insurance. Organisations relying on enterprise risk solutions from SAS include Assicurazioni Generali, Danske Bank, HDI Assicurazioni, KBC, P&V Group and Unipol Gruppo Finanziario.

New regulations, such as Basel III alongside external pressure for transparency in risk calculation and allocation, strain processes for funding and capital allocation. Banks must deploy an integrated risk management framework to remove silos and provide a holistic view. Only a complete enterprise risk management solution will deliver capabilities beyond the realm of regulations to an integrated view of risk appetite and the governance required to manage it. With SAS, banks can address Basel III requirements on liquidity, incremental capital charge and counterbalancing hedging assets. Also, the solution offers a complete liquidity risk analysis that goes beyond the Basel III mandates and analyses internal economic capital, market risk and firmwide risk.

The foundation for SAS Risk Management for Banking is an integrated data structure for all applications. A banking-specific data model, SAS Detail Data Store for Banking, is the single source of information for the risk data warehouse. By eliminating or reducing data inconsistencies through comprehensive data management, SAS increases control over and ownership of risk management data.

SAS Risk Management for Banking supports the integration and reporting of enterprise risk measures as well as incremental levels of the entity, business unit, geography or any other user-defined hierarchy. The solution's reporting capabilities provide the audit, change, archive and historical data to support rigorous reporting requirements, both current and future, while harnessing the power of the SAS Business Analytics Framework.

Taking effect on 1st January, 2013, Solvency II remains in flux as new requirements emerge. The latest version of SAS Risk Management for Insurance helps to address current Solvency II directives and enables users to easily incorporate remaining requirements.

New functionality supports counterparty default risk and operational risk, as defined by Solvency II standard calculations. Also, the solution determines solvency capital requirements at both group and solo insurance entity levels. SAS Risk Management for Insurance now includes additional prebuilt reports and enhanced reporting capabilities that aggregate risk analysis results for all risk types, including market and operational risk, life and non-life underwriting risk, and counterparty default risk. A new Flash-based user interface improves user experience and ease of use.

Insurers worldwide, such as Italy-based Unipol Gruppo Finanziario (which uses SAS Risk Management for Insurance) embrace technology to handle Solvency II demands. "The data governance strategy for Solvency II requires special attention be paid to organisational issues, with a focus on people, processes, roles and responsibilities," said Vittorio Corsano, regulation reporting/rating manager and project manager for Solvency II at Unipol Gruppo Finanziario. "This meets Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) guidelines and requirements; but it is mainly needed to base the Solvency II project on data whose high quality – from both the technical and business viewpoint – is aiming to ensure efficient processing as well as compliance with set targets and purposes."

Danske Bank, Denmark's largest bank, recognised the need for a new platform to connect the risk and capital calculations analysis and chose SAS Risk Management for Banking as its platform for calculation of economic capital. Analysts at the bank can work without IT involvement and risk calculations can be performed by one unit using an integrated approach.

"We are working on developing a better interaction between the bank's risk experts and the bank managers, as well as the interaction between IT and business in this area," said vice president Simon Haldrup, who is head of the risk and capital management unit. "One important element is that we are able to manage all parts of our calculations and develop, change and understand the analysis behind the figures ourselves. We want to drill down and understand the dynamics, and at the same time become better at compressing and communicating this knowledge to the management of the bank."

The long-term goal at Danske Bank is to build a risk-conscious culture in the bank. "We have to be razor-sharp on recognising and understanding the risk we are exposed to," said Haldrup. "Basically, it is about telling the good customer from the bad customer, and knowing the risk-adjusted profitability of the customer. We can measure and analyse it, and we have to move in that direction."

"The important thing is that we now have an open solution in which all dynamics can be followed and understood by our analysts," said Haldrup. "The framework solution from SAS has an interface that fits our analysts very well with regard to competencies. They do not have to be IT experts to carry out analyses, and as economists they possess the required knowledge for using the solution." Additionally, the latest stress test was performed using the new platform since stress testing is part of the bank's new risk management approach.

KBC is using both SAS Risk Management for Insurance and SAS Risk Management for Banking to provide a central, groupwide risk reporting solution and help address Solvency II guidelines. With SAS, the bancassurer, which focuses on home markets in Belgium and Central and Eastern Europe, can obtain a consistent and quick view of overall risk exposures across risk types, departments and geographies. Supported with extensive workflow capabilities, the entire groupwide risk reporting process will be covered including: data integration and storage of different risk results, data quality monitoring, reconciliation of finance and risk numbers, risk aggregation, internal reporting on all risk types, data exploration and regulatory reporting.

Like Unipol, Belgium-based P&V Group is tapping into SAS Risk Management for Insurance for Solvency II preparation and enterprise risk programmes. P&V Group wanted a single, integrated architecture provides data quality, firm-wide risk management and Solvency II compliance. SAS Risk Management for Insurance delivered a central, firm-wide solution that provides a consistent and quick view of overall risk exposures across insurance entities in a structured and auditable way. With SAS, P&V Group will be able to swiftly implement any new and future reporting requirements, including internal and Solvency II regulatory reports.

HDI Assicurazioni chose SAS Risk Management for Insurance to improve data quality, make faster risk-based decisions and comply with Solvency II. While some companies view Solvency II requirements as a bureaucratic necessity, HDI sees the rules as an opportunity to focus on its financial health and customer service-focused business.

Solvency II protects consumers by more accurately assessing risks and requiring greater transparency. "It has a positive impact on the economic and financial soundness of the company, to the customer's benefit,'' said Francesco Massari, HDI's head of organisation and information systems. "It also offers an opportunity to extensively rethink the organizsational processes and procedures related to risk management, improve the quality of the data, increase the effectiveness of the control systems and promote accountability towards the stakeholders. It's an opportunity, rather than a bureaucratic event."

SAS technology has long been present at HDI, so they concentrated on redesigning their existing system according to new Solvency II requirements and creating a unique companywide data warehouse. One goal was to collect, standardise and consolidate all information relating to property-casualty business. Another goal was to achieve, through the calculation engines available from SAS, a real-time decision support system, that offers business users, actuaries or senior management the tools to make decisions based on facts. "SAS Risk Management for Insurance solution offers us the necessary guarantees in terms of robustness, reliability and quality of the data and measurements produced," said Massari.

"The flexibility of SAS Risk Management for Insurance first made it possible to compress both the investment and deployment times, which were fully in line with the budget,'' explained Massari. "With the contribution of SAS analysts, we were able to detect during the construction problems related to the flow of extraction and management procedures and take appropriate corrective actions. We have met the double objective of improving data quality and streamlining information processes."

Today's announcement came at The Premier Business Leadership Series event in Antwerp, Belgium, a business conference presented by SAS that brings together more than 600 attendees from the public and private sectors to share ideas on critical business issues.

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