Proactive Risk Management and SAS Framework

Risk Intelligence in SAS KOREA

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 Enterprise Risk Management
When weathering the storm is not enough

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Spreadsheet Risk

Lack of access to original data.

Difficult version control.

No documentation.

Partially unintelligible macros.

Revision lacks data security and
traceability.

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 After the storm, 2009 SAS ERM survey
A new era for risk management in financial services*
Findings from a 2009 SAS and Economist Intelligence Unit survey

We are seeing an erosion of confidence and a retreat from

risk.

Transparency is a common theme to proposed reforms.

Reforms to risk management within institutions will be far-
reaching and comprehensive.

Culture, expertise and data are the weak points in
companies’ risk management.
• Respondents lack confidence in the ability of supervisors
to formulate the right response to the crisis.

* Economist Intelligence Unit : Sponsored by SAS 2009, www.sas.com/sascom-ermsurvey

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 Reforms will also be comprehensive
Over the next year, what do you expect to be the three key areas of focus in the management of risk in your or
ganization?

EIU/SAS- ERM “After the storm” Research & Briefing took place March to May 2009 Survey of 334 financial services executives 50% C level – all have responsibility for risk Even global d
istribution Programme of in-depth interviews with high-level experts

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 For better management of risk data

“ As the competition gets sharper,

you’ve got to get smarter.
And understanding your data is
the key to getting smarter.”
Mike Stevens
Head of Credit Risk Analytics
BB&T

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Making a case for risk data management
Sophisticated models are meaningless without consistent, reliable data

Main challenges in adopting an ERM strategy

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 Moving from stress tests
to broader scenario analyses
Holistic Approach - Strategic
Source systems Stress & Scenario Risk Engine Aggregation &
Tests Reporting

Reverse
Define & Stress Testing
Market / Manage
Static Data

Integrated

Generate sce
nario data
Front Office Dashboard
/ Portfolios

Business
Risk Analysts Management and
Risk Advisory
Committees

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Liquidity risk in the spotlight
Major international and national regulatory publications on liquidity

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 The Renaissance of Liquidity Risk
With liquidity risk in the regulatory spotlight,
new IT challenges are looming

Main challenges in adopting an ERM strategy, 2009 SAS ERM survey

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 The Renaissance of Liquidity Risk
With liquidity risk in the regulatory spotlight,
new IT challenges are looming

Main elements of a liquidity mgt. system from the FSA IT challenges

The Analytical Challenge

Cash-Flow Challenge

Liquidity-Buffer Challenge

Complexity Challenge

Challenge of New Measure

The Time Challenge

The Data Challenge

The Reporting Chanllenge

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Operational risk management
can pave the road to integrated risk management
Rod Nelsestuen : Senior Research Director in the TowerGroup Finanacial Strategies

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 Risk Analytics in business analytics area
For Science of winning

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 In Analytics at Work, Davenport, Harris, and coauthor Robert Morison reveal how
any manager can effectively deploy analytics in day-to-day operations and one b
usiness decision at a time. Based on all-new research and illustrated with exam
ples from companies including Humana, Best Buy, Progressive Insurance, and H
otels.com, this implementation-focused guide outlines the five-step model for dep
loying and succeeding with analytical initiatives.

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 Integrated Risk Landscape
Yesterday – Today - Tomorrow
Reporting/Management

Portfolio 1 Portfolio 2 Portfolio 3 Portfolio 4

Market Risk Rep-Risk

Liquidity

Credit Risk Oper. Risk xx-Risk

Scenario Generator

Micro economic & Macro-economic/external factors

Financial Market
endogenous factors
Labour Market
Productivity
Environment
)..

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Closer Integration
VaR / Limit
Scenario1: Interest Shift Limit Utilisation
Relations

Market
P/L Change
Risk/Present
Value evaluation

Return on Risk
RORAC, etc.
Liquidity Costs
Liquidity Risk

Capital
Requirements
Credit Risk Credit Risk
Calculation

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 Closer Integration
VaR / Limit
Limit Utilisation
Relations

Market
P/L Change
Risk/Present
Value evaluation

Return on Risk
Scenario 2: Credit Spread Shift RORAC, etc.
Liquidity Costs
Liquidity Risk

Capital
Requirements
Credit Risk Credit Risk
Calculation

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Risk Management Rating Agency Perspective

Advanced capabilities to identify, measure, manage all risk exposures within tolerances
Excellent
Advanced implementation, development and execution of ERM parameters

Consistently optimizes risk adjusted returns throughout the organization

Clear vision of risk tolerance and overall risk profile

Risk Control exceeds adequate for most major risks
Strong

Has robust processes to identify and prepare for emerging risks

Incorporates risk management and decision making to optimize risk adjusted returns

Has fully functioning control systems in place for all of their major risks

May lack a robust process for identifying and preparing for emerging risks
Adequate

Performing good classical “silo” based risk management

Not fully developed process to optimize risk adjusted returns

Incomplete control process for one or more major risks

Weak

Inconsistent or limited capabilities to identify, measure or manage major risk exposures

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Enterprise Risk Management

Hybrid-Stage 1 Hybrid-Stage 2 Net Result (Full ERM)

Different Silo Solutions

From
Point Vendors

Risk-Solutions

Time

Pure or hybrid form

Pure form or approximation (SAS) highly integrated

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 Enterprise Risk Management
Operational Data Sources

Policy

Underwriting

Claims
External Data

Reinsurance
Internal Data

Investment

Commissions

Products

Assets/Liabilities

General Ledger

Data Mart

Standardisation

Operational Risk Engine

Actuarial Risk Engine

Credit Risk Engine Risk Data Warehouse

Market Risk Engine

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 Enterprise Risk Management with SAS
Operational Data Sources

Policy

Underwriting

Claims
External Data

Reinsurance
Internal Data

Investment

Commissions

Products

Assets/Liabilities

General Ledger

Data Mart

Storage
Data Model
Standardisation
SAS Risk

Operational Risk Engine Inelligence

Actuarial Risk Engine Platform

Credit Risk Engine Risk Data Warehouse

Market Risk Engine

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 Enterprise Risk Management with SAS
Operational Data Sources

Policy

Underwriting

Claims
External Data

Reinsurance
Internal Data

Investment

Commissions

Products

Assets/Liabilities

General Ledger

Data Mart

Standardisation

Operational Risk Engine

Actuarial Risk Engine

Credit Risk Engine Risk Data Warehouse

Market Risk Engine

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 SAS solutions support the risk lifecycle
Strategies & Analysis
Instruments • Identification &
Identification
• Credit Risk Strategy judgement of
of Risks potential risks
• Risk Return
• Economic Capital • Business Analysis

Steering
Group
Data
Source Risk Data
Warehouse
Internal & External Risk Initiatives • Organisation
Risk Reporting Market Risk • Admin
• Quarterly Credit Risk • Development
• Annual Liquidity Risk
• Rating Agencies Operational Risk
• Banking supervision
Regulatory Risk
• Regulators
.2 Methodology
• Ratings
Communication • VaR-Models
of risk • Stress Testing
Risk Measurement
• Portfolio models
• Back Testing
• Benchmarking
Risk policy
guidelines
• Regulation of Risk Monitoring
responsibilities
• Limits structures
• Monitoring of all business
Lines

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SAS Combines Technology and Solutions

SAS ® Business Analytics Framework
 Data Management (integration and quality)
 Data model / uniform View / transparency
 Metadata
 Adaptable and comprehensive analytics
 Reporting

Solutions
 SAS® Risk Dimensions®
 SAS® Credit Risk Management
 SAS® Operation Risk Management
 SAS® Risk Management for Financial Insit.

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 SAS® Risk Solution Capabilities

SAS® Risk Management

Reporting

Market Risk Credit Risk ALM Firmwide Risk

IR, EQ, FX Risk Stress Testing GAP Analysis Economic Capital

Stress Testing Potential Future Exposure Stress Testing Stress Testing

Liquidity Risk Credit VaR Liquidity Risk Correlated Aggregations

Market VaR Net Interest Income Risk Adjusted Performance

Data Management – Data Models & Flows – DDS & Data Marts

Source Systems
Enterprise Data Warehouse ERP Systems Other Risk Systems

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High Performance Risk Appliance
Business Description

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High Performance Risk Appliance
Business Description

SAS recognizes that speed in analytics and decision making is

critically important in today’s competitive environment and offers
a high performance risk appliance that takes advantage of the
latest evolution of multi-node, multi-core servers and SAS’
patent-pending architecture and algorithms. This high
performance risk appliance enables portfolio and valuation
information to be calculated in minutes so results are
available in near real time.

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High Performance Risk Appliance
Business Impact

The inability to monitor trader or counterparty risk limits

in a timely fashion

Lost market share or business opportunities

because of a firm’s limited abilities to quickly identify and
aggregate market exposures across books

Limited capability to match funding strategies and

margin requirements changing risk exposures

Limited capability to identify risk factor concentrations

or plan for stress scenarios on large portfolios

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High Performance Risk Appliance
SAS Differentiators

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 High Performance Risk Appliance

Linking the front and

middle offices

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 Risk Reporting

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 Risk Reporting

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 Risk Reporting

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 Risk Reporting

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 Ad-hoc Reporting & Analysis

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Risk Analytics in Demo Booth

Scene #1 : Business Analytics

Scene #2 : Risk Analytics in Business Analytics

Scene #3 : Risk Solution Capabilities

Scene #4 : Risk Analytics

#4-1 Credit Portfolio Management

#4-2 Risk Assessment Monitoring

#4-3 Risk Simulation

Scene #5 : Risk Engine & Risk Dashboard

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SAS ranks first in Chartis RiskTech100™ report

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“ When a customer has any analytical problem,
SAS should be the first software that should
comes to mind.”

SAS Vision
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