Financial Risk Management: Integrated Solutions to Help Financial Institutions to Address Risk

© 2010 IBM Corporation

Integrated Risk Management

Paul Leonhirth – Integrated Risk Management Solutions, Banking & Financial MarketsAugust 2010


Building a smarter planet

2

The reality of living in a globally integrated world is upon us

Sophistication has outstripped our ability to handle it

Together government and industry must balance stability and innovation

To thrive, firms must innovate their business models

Daily interactions must deliver on brand promises

Source: Tower Group



3

The world is connected: economically, socially and technically

Source: Tower Group



4

The need for progress is clear

80% 93%

25 billion 10,000

Of financial services firms who say their governance, risk and compliance processes are still not integrated across their enterprise.

Of the 285 million electronic attacks in 2008 were focused on the finance sector, with well over half detected by third parties.

Global trading IT infrastructure are under extreme stress, handling billions of market data messages each day.

Estimated number of banking regulations in the US, with 4,000+ new regulations in the pipeline.



5

Information Access Analytics

Integrity and Business Insight

Data Quality and Governance of

Information

Process Improvement,

Automation and Rationalization

Total Exposure Information

Credit Risk Reporting

Limits & Utilizations

Overdrafts & Netting

Collateral Management

Operational Risk Reporting

Stress Testing

Market Risk Reporting & Analytics

Trending and Predictive Capabilities

Top Risk Management Concerns and Challenges

Credit Risk

Market Risk ComplianceOperational

Risk

Quality & Completeness of Source Data

Linking Data to Common Client/Institution

Recognition of Risk Management Needs

Siloed Initiatives

Data Aggregation

Data Lineage

Key Risk Indicators

Credit Limit Approval Process

Credit Lending Process

New Business Acceptance

Client Investment Agreements

Multiple Risk Calculators

Duplicate Functional Systems

GL Reconciliations



6

They will use transparency as a means to manage risk and as an engine for growth.

Financial institutions must do their part to restore trust and confidence in the global financial system

Success requires people, process and technology improvements that include new and smarter ways of

Measuring, modeling and applying risk-related information.



7

Smart is:Having the right mix of control across all points of vulnerability

Smart is:Having a cross view of risk exposure

Smart is:Mitigating risk by elevating and leveraging IT

1

3

2Smart is:Automatically managing business processes

4

Smart risk management is about collecting better information, using it more quickly and more effectively, and minimizing the need for human interaction in routine events



8

Financial Risk1

Risk Insight and Optimization Solution for Financial Services

Credit Analytics

Scalable Architecture for Financial Reporting

These solutions increase the quality, transparency and timeliness of your risk information while proactively managing your exposure and liquidity. Recognize and predict complex causal relationships.



9

2

Anti-Money Laundering Investigations, Alert Modeling and Analytics

Integrated Fraud and Financial Crimes Platform

Threat and Fraud Intelligence

Identity and Access Management Platform

These solutions help in real-time risk-monitoring, continually updating user profiles, associations and patterns of behavior.

Financial Crimes



3

IT & Infrastructure Risk & Resilience, Data Encryption and Leakage Protection

Managed Identity, Business Continuity & Resiliency Services

Operational Risk Reporting Information Foundation

Enterprise Security Risk Monitoring, IT Security Infrastructure

These solutions continually track emerging and evolving threats to physical and IT infrastructure assets. Institute a holistic response to business and operational risks.

Operational & IT Risk

10



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Compliance Information Lifecycle Management

Inventory of Obligations

Monitoring and Reporting

4These solutions help adopt a holistic approach to your obligations analysis—driving the control and oversight of your business processes by aligning IT strategy with business strategy.

Governance and Compliance



Building Capabilities for Smarter Banking: Integrated Risk Management

12

Uni

que

valu

e re

aliz

ed

Use of Smarter Planet capabilities

Manage Data1

Analyze Patterns2

Optimize Outcomes3

Integrate siloed data to improve positions and regulatory reporting

Monetize data to achieve performance goals and improve business resilience

Manage risk appetite Data for compliance

Cost containmentLoss mitigation capabilityReduction in fraud losses

End-to-end visibilityCustomer retentionBusiness resilience

Enabled by the IBM Banking Industry Framework

Leverage insights to increase visibility of both threats and opportunities



13

Enables you to holistically manage risk across the enterprise with an integrated set of software and service assets developed through multiple projects within four core risk management domains.

Banking Industry Framework for Integrated Risk Management

Key Benefits:

Faster deployment

Lower Risk

Support for adoption of open & industry standards

Offer choice of business applications from IBM & its partners

Simplified enterprise architecture



Integrated Risk Management — Solution Focus Areas

FinancialCrimes

Governance and

Compliance

Financial Risk

Operational and IT risk

IntegrationOptimization

AnalyticsCollaboration

SecurityResiliency

WAS, BPM, ILOG BRMS

ITSM, TSIEM, TCIM

AppScan, Compliance IoO

ISAS Predictive Analytics

Operational and IT Risk

Financial Risk

Governance and

Compliance

Financial Crimes

IntegrationOptimization

AnalyticsCollaboration

SecurityResiliency

Integrated Risk Management

14

Automate Resolving False Positives and Alert Triage

Integrated Fraud and Financial Crimes platforms

AML/Fraud Operational Effectiveness and Risk Mgmt

Customer Identification and KYC, Customer Risk Ratings

Entity Management / ID Relationship Resolution

Investigative Case Management with Web 2.0

Comprehensive Security Risk & Control Management

Trusted Identity Management – Identity & Access

IT Service Management – Asset, Configuration, Incident, Change, Release Management (ITSM, CRDB, ITIL)

Proactive, DB activity/control monitoring, event correlation, analytics and IT Risk Mitigation techniques

Application Security, IT Risk, Integrity & Privacy

Compliance Information Lifecycle Management

Compliance Inventory of Obligations for Corporate Governance and Internal Controls

Sales and Market Conduct Compliance

Regulatory Compliance, BI and Reporting

Risk Data Management for Credit, Market, Liquidity Risk

Risk Insight for Banking Risk and Performance

Real Time Risk, BI and Reporting Solutions

Risk Analytics, Risk Optimization, Analytics and Insight

Quantitative Risk Modeling and Scenario Analysis



15

We’ve only just begun to uncover what is possible on a smarter planet.

The world will continue to become smaller, flatter and smarter. We are moving into the age of the globally integrated and intelligent economy, society and planet.

There’s no better time to start building a smarter financial system—focused on restoring public and governmental trust and breathing new life into the global economy.

Let’s work together to drive real progress in our world.For more information, visit ibm.com/banking/risk

Financial Risk Management: Integrated Solutions to Help Financial Institutions to Address Risk

Economy & Finance

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