Analytical banking solutions from sap

The analytical applications available from SAP offer comprehensive support for business intelligence; financial performance man-agement; governance, risk, and compliance; and finance and risk management. Robust data management software provides the foun-dation for this support. State-of-the-art reporting and visualization software enriches industry-specific calculation engines for finance and risk manage-ment. Applications for finan-cial performance management help managers align corpo-rate strategy and execution.

AnAlyticAl BAnking SolutionS from SAP FRom STRATegy To execuTion And BAck AgAin

SAP Solution in DetailSAP for Banking

4 Information Management Tools to Meet Today’s Challenges

5 A Flexible Platform for Business Intelligence

5 enterprise data Warehousing and information management

6 information discovery and delivery

7 Business intelligence for High data Volumes

9 Comprehensive Tools for Financial Performance Management

9 Strategy management10 Business Planning 11 Financial consolidation12 Profitability and cost

management

13 Robust Solutions for Gover-nance, Risk, and Compliance

14 Finance and Risk Management15 Financial Accounting15 Profit management16 Basel ii16 Limit management17 Asset Liability management17 credit Portfolio management17 Regulatory Reporting

19 A Variety of Business Benefits19 make the most of your data

20 Quick Facts

contEnt

The banking industry is constantly awash in new regulatory, market, and opera-tional requirements that demand greater business transparency and insight. Banks must now disclose more infor-mation and manage more key perfor-mance indicators to address new risk and compliance issues effectively.

These challenges have made the bank-ing iT environment much more complex and costly to maintain. many banks must manage multiple information silos for individual lines of business and expend huge effort and cost to reconcile the data from those silos. This is exac-erbated by redundant interfaces and data that is inconsistent, inaccurate, or both. All too often, banks do not have the timely control they need over their business processes or the quality of their offerings.

Leading banks have found that they can reduce costs and significantly increase the quality of their information by inte-grating the architecture for finance and risk management. They are combining analytical software within the SAP for Banking set of solutions with applica-tions from the SAP® Businessobjects™ portfolio and the SAP netWeaver® technology platform (see Figure 1).

informAtion mAnAgEmEnt toolS to mEEt todAy’S chAllEngES cReATing A SingLe, AccuRATe, And TimeLy SouRce oF dATA

SAP Businessobjects business intelligence solutions provide robust support for enterprise information management, enterprise date ware-housing, and information discovery and delivery. you can draw on data from both SAP and non-SAP sources, clean this data, and store it in an enterprise data ware-house to form a solid foundation of reliable information. Software for information discovery and delivery lets you access and distribute information to business users in the most intuitive format.

Analytical Banking

Financial performance management

governance, risk, and compliance

intelligence platform

Finance and risk management

SAP® eRP Financials

Figure 1: Support for Analytical Banking from SAP

This way, banks like yours can create a “single version of the truth” for infor-mation management that addresses the business and operational challenges that face the industry today.

4 SAP Solution in Detail – Analytical Banking Solutions from SAP

To make business decisions that are both timely and appropriate today, a bank must be able to integrate, analyze, and report on ever-increasing volumes of information as quickly as possible. once you have used this information to design your key business strategies, you must align those strategies across your insti-tution and ensure that they are fully sup-ported by business processes through-out the bank. in addition to the reporting and dashboard functions of business intelligence software, the analytical banking solutions from SAP give you greater real-time control of key pro-cesses for closed-loop optimization of business performance – from strategy to execution and back again.

SAP® Businessobjects™ business intel-ligence (Bi) solutions provide robust support for enterprise information man-agement, enterprise date warehousing, and information discovery and delivery. you can draw on data from both SAP and non-SAP sources, clean this data, and store it in an enterprise data ware-house to form a solid foundation of reli-able information. Software for information discovery and delivery lets you access and distribute information to business users in the most intuitive format.

SAP Businessobjects Bi solutions empower business users with: • Quick, direct access to data (both

structured and unstructured) that is relevant, accurate, and clean

• Access online, offline, or off-site• Best-in-class, high-volume enterprise

reporting• Highly interactive visualization and

dashboarding• Powerful ad hoc reporting and analysis

tools

The enhanced Bi functionality of SAP netWeaver Business Warehouse Accelerator (SAP netWeaver BW Accelerator) software can boost the performance of these or other analytical applications and services to speed the execution of user queries and reduce iT support time (see Figure 2).

Enterprise Data Warehousing and Information Management

With rapid growth in the sources and volumes of enterprise data, banks that can manage and harness their data hold a strategic advantage. one of the major challenges banks face with respect to business intelligence is inte-grating different source systems into an enterprise data warehouse that pro-vides a central repository of accurate, up-to-date information to help them

adapt quickly to new business challeng-es and requirements. enterprise data warehousing can also facilitate the administration and monitoring of all business processes and proactively support the handling of possible perfor-mance issues.

enterprise data warehousing software from SAP helps you create and operate a data warehouse that can serve your entire institution. The software sup-ports both strategic analyses and oper-ational reporting. it can help you pre-pare near-real-time reports by integrating heterogeneous systems and improving the design time and runtime of busi-ness intelligence models and process-es. it provides a solution for business intelligence that is flexible, reliable, robust, scalable, and straightforward to administer.

A flExiBlE PlAtform for BuSinESS intElligEncEmAking THe RigHT deciSionS AT THe RigHT TimeS

enterprise data warehousing and information management

data integration

data quality

data modeling

data harmonization

SAP netWeaver® Business Warehouse Accelerator

High-volume data analysis

Performance optimization

information discovery and delivery

Query, reporting, and analysis

Reporting Analysis dashboards Search information delivery

Advanced analytics

Predictive

Intelligence Platform

Figure 2: Support for an Intelligence Platform from SAP

5SAP Solution in Detail – Analytical Banking Solutions from SAP

• Enhance data integration – The solu-tions help you consolidate large, hetero-geneous landscapes for data acquisition, modeling, and transformation.

• Migrate data – you can use the solu-tions to migrate data from legacy or obsolete systems to new systems – for example, to transactional banking solutions from SAP.

• Improve data security – Flexible management of end-user and stan-dard authorizations lets you adhere to various security standards within your organization.

• Strengthen information life-cycle management – By reducing online data volume, the solutions can improve the performance and lower the cost of your Bi software.

Information Discovery and Delivery

Bank managers everywhere are con-cerned about reducing costs, improving efficiency, and helping employees make well-informed decisions. To accomplish

these goals, business experts within your institution must be able to see and share up-to-the-minute data securely within a familiar software environment. Providing employees with appropriate interfaces for working with this information on their own can also enhance productivity.

Visualization and reporting software from SAP provides powerful, actionable reporting functionality to help you design, explore, visualize, and deliver formatted reports that enhance business insight. you can deploy highly interactive dash-

boards to track and monitor key metrics, view summary business trends, and create what-if models. The software is integrated with microsoft office to automate the transfer of business intel-ligence into microsoft PowerPoint or microsoft excel for further analysis or presentation. iT professionals and report authors alike can use the package to pre-pare highly customizable, professional-looking reports and create interactive dashboards that they can easily deploy throughout your business.

data integration and data quality man-agement software from SAP offers enterprise-class software for managing data integration and data quality. With best-in-class tools that use open stan-dards and Web-based services, the software provides the foundation you need for key business or iT initiatives. you can incorporate massive volumes of data from virtually any other system, database, or application.

Together, this support helps ensure the data quality and compliance required for today’s complex regulatory report-ing environment. Such support is par-ticularly important for global institutions that must adhere to the requirements of both local and international authorities. These solutions can help you integrate multiple sources of data into a single financial database of information that is accurate, clean, and standardized for all your reporting needs.

you can also use the solutions to:• Foster confident decision making –

World-class tools for enhancing data profiling and quality help ensure that your data is trustworthy, accurate, and auditable. data lineage and auditing features further support end-user confidence.

• Streamline development – you can simultaneously address data integra-tion and data quality management. you can repurpose and redeploy proven pieces of your data integration framework using a shared repository for development collaboration.

By helping your bank comply with a constantly changing array of accounting and regulatory reporting require-ments, the analytical banking applications from SAP make it easier to align capital more closely with changing market conditions and legal requirements. in the process, you increase the confidence of your stakeholders.


you can create a banker’s dashboard, for example, that provides an up-to-the-minute, 360-degree view of your institu-tion in a single, consolidated snapshot. The dashboard lets you track key perfor-mance indicators and visualize essential business trends. data for the dashboard is directly accessible from both SAP and non-SAP sources with a high level of detail and drill-down functionality.

using enterprise query, reporting, and analysis software from SAP, you can link the numerous islands of information that disparate sources of data tend to create. Business users can create their own queries and spontaneously interact with this information. users can apply advanced filters, sort data and drill down to greater detail, find exceptions, and design calculations to suit their specific needs.

The software can help all your employ-ees answer their own questions quickly through personalized reporting – even if they have minimal knowledge of the underlying data sources or business intelligence software. Highly relevant search results and suggested actions reflect each employee’s role in your business and honor the business con-text of each search query.

you can use the robust support for ad hoc queries to align your human capital resources with your strategic objectives, for example. you can create queries and reports for new hires and termina-tions by line of business alongside pay-roll and benefits costs in a single report to align with your business goals.

you can also use these solutions to:• Transform data into actionable

information – A wide mix of reports available on demand help employees communicate in real time with col-leagues throughout the bank and across the globe. Built-in templates, data drivers, and wizards streamline the reporting process.

• Examine key business processes – An intuitive display of key metrics and processes lets users play out multiple what-if analyses directly from a dashboard.

• Empower users – employees can easily combine SAP and non-SAP data in reports, make calculations, and customize the report format to suit their current needs. They can choose an interface that’s right for them – be that a self-service reporting and analysis tool, access through a mobile device, or a high-power inter-face for drilling down to lower levels of detail.

• Free up IT resources – user-friendly, enterprise-wide search and reporting functions help employees address new business issues without help from your iT staff.

Business Intelligence for High Data Volumes

Today most knowledge workers gener-ate their own reports, use their own dashboards, and control processes embedded into business applications from their desktops. All too often, how-ever, the burden of support for these activities rests with your iT department – which must manage sophisticated

Leading banks have found that they can reduce costs and signif-icantly increase the quality of their informa-tion by integrating the architecture for finance and risk management. They are combining ana-lytical software within the SAP for Banking set of solutions with ap-plications from the SAP Businessobjects port-folio and the SAP netWeaver technology platform. This way, banks like yours can create a “single version of the truth” for information management that ad-dresses the business and operational challeng-es that face the industry today.


desktop analytics as well as new information, users, and query techniques. These demands, combined with a grow-ing number of users and an expanding volume of data, can place a serious strain on bank iT resources.

SAP netWeaver BW Accelerator com-bines high-performance technology from SAP and an advanced hardware design from intel corporation to boost the performance of your analytical ser-vices and applications. it reduces iT support time by performing on-the-fly data aggregation and eliminating the need for query tuning.

you can also use the software to:• Improve user support – SAP

netWeaver BW Accelerator can significantly speed user queries while providing access to full historical data. it gives users greater flexibility in the types and depths of their que-ries, which encourages creativity in analyzing business problems.

• Reduce operational overhead – The software eliminates the need for performance tuning, enabling faster prototyping of new Bi tools and ana-lytical applications. it can also minimize the volume of calls to iT departments about slow responses to queries.

• Improve your return on investment – SAP netWeaver BW Accelerator fully complements your existing hardware and software and lets you accommo-date more users, data, and Bi tools at a relatively low cost.

Banks must also review their performance in terms of optimizing costs and maximizing profit. SAP offers solutions to help banks identify ex-actly where they make their profit. The solutions use comprehensive cost-ing approaches to calcu-late cost, revenue, and other relevant figures – including funds-transfer prices on the transaction level.


comPrEhEnSivE toolS for finAnciAl PErformAncE mAnAgEmEntTuRning BuSineSS STRATegieS inTo PRedicTABLe ouTcomeS

• Strategy management• Business planning• Financial consolidation• Profitability and cost management

Strategy Management

in cases where bank employees do not fully understand the organizational strategies of their institutions, they do not recognize how their decisions impact other aspects of the business. And because employee incentive systems are usually not linked to the business strategy, the personal goals of employees are seldom aligned with those of the institution. in addition, banks typically lack the tools for linking their strategic objectives with their processes for budgeting, planning, and reporting.

you can use the financial performance management software to connect your reporting, planning, and analysis process-es and close the gap between strategy and execution. The software can help you achieve operational excellence by identifying and eliminating the most crippling costs to your business and focusing on areas that deliver the most profit. you gain competitive advantage by exploiting key indicators of financial and nonfinancial performance and by benchmarking data for enhanced results and improved market share.

in addition to reducing compliance costs, the software can promote faster perfor-mance management cycles by helping you quickly access and share financial and nonfinancial information across your institution. included is support for:

define strategy and prioritize accordingly to help ensure alignment with corporate goals

Strategy management

Financial Performance Management World-class applications supporting all financial processes enabling closed-loop financial performance management

gain insight to manage and measure business plans and enable proactive, rather than reactive, business tactics

Business planning

meet all legal and management reporting requirements with automated, robust consolidation processes

Financial consolidation

drive enterprise profitability through a real-time understanding of cost, capacity, and revenue

Profitability and cost management

Historically, a bank’s finance office has relied on a disparate set of tools from multiple vendors to address traditional duties like financial planning, reporting, and consolidation. As cFos and finan-cial managers take on additional strate-gic responsibilities, they need a single information platform that is more unified and robust.

SAP Businessobjects enterprise per-formance management solutions deliver deep business insight based on a holistic perspective of the enterprise. These include software for financial performance management that helps finance officers and other top decision makers define and communicate key bank strategies, plan and measure the execution of those strategies, forecast future figures, and react to any deviations from anticipated strategy outcomes (see Figure 3). This best-of-breed software fosters fast access to reliable financial information, a deep understanding of how value is generated, and strategic insight that can help decision makers more accurately predict future business outcomes.

The software helps every stakeholder communicate, collaborate on, and exe-cute a flexible, well-defined action plan. it can help you identify areas of the bank’s business that need improvement and evaluate alternative strategies for promot-ing efficiency, cutting costs, and enhancing profits. The software can also facilitate compliance with requirements for finan-cial reporting and corporate transparency. Figure 3: Software for Financial Performance Management from SAP


• Formalize your operational review process – you can present certified information on goals, initiatives, and metrics for structured operational reviews that present a unified story of performance and synchronize the activities of individual departments.

• Communicate business strategies more effectively – SAP Businessobjects Strategy manage-ment provides a collaborative envi-ronment of user-defined views through which bank employees can visualize, discuss, and update business objectives.

• Manage key initiatives – The applica-tion helps you focus on initiatives that are most critical by analyzing the inter-dependencies of those initiatives and evaluating projects based on specific milestones.

Business Planning

Business planning can be a chaotic, frustrating, and ineffective process at many banks. To be effective, you must be able to integrate corporate and departmental planning, intelligently model different cost scenarios, and determine operational budgets based on various strategic plans and economic assump tions.

The SAP Businessobjects Planning and consolidation application can help you standardize processes for planning, budgeting, forecasting, predictive anal-ysis, and reporting with tools that are familiar and intuitive. in addition to help-

you can use the application to address such key strategic areas as risk-adjusted return on capital (RARoc). With SAP Businessobjects Strategy management, you can inform profit centers, risk man-age ment staff, and other relevant parties about the new performance measure and explain the new incentive scheme.

you can make regular RARoc reports to senior management from individual business units. To improve manage-ment’s acceptance of RARoc, you can create a response forum where stake-holders can discuss their experiences and revise their business objectives.

you can also use the application to:• Make written plans more meaningful

– your plans can include rich contex-tual visualizations that drive a greater understanding of key objectives. managers can test various strategy alternatives to identify the cause-and-effect relationships that maximize performance.

The SAP Businessobjects Strategy management application helps banks integrate their goals, initiatives, and metrics to help all levels of their organi-zations improve performance, productivity, and satisfaction among employees and customers. By clearly linking your bank’s strategic plans to specific business ini-tiatives, performance measures, and staff responsibilities, you can set easily under-stood priorities and tasks that all employ-ees can address with confidence.

The application helps line-of-business managers and corporate executives align enterprise strategy with individual, functional, and divisional performance measures and establish objectives, measures, metrics, and key performance indicators that truly reflect the levels of achievement in your organization. it can empower employees to leverage their collective intelligence, work collab-oratively toward a common mission, and understand exactly how they bring value to the business.

SAP for Banking solutions provide full support for the industry reporting requirements that banks face today. Predefined standard reports help ensure a rapid return on your investment. integration with flexi-ble, user-friendly tools in the SAP netWeaver Busi-ness Warehouse component enhance these reports through state-of-the-art technology.


• Enhance business reporting – you can perform production and manage-ment reporting (including exception reports) as well as multidimensional analysis. A “park-and-go” feature captures data to let you work remotely offline.

Financial Consolidation

Banks must deal with multiple curren-cies, accounting standards, and report-ing requirements. many also grapple with the challenges that result from mergers and acquisitions, such as inte-grating new business units into the reporting chain. Financial departments often find themselves in the eye of these business whirlwinds. With both internal and external reporting require-ments to fulfill, your finance people need information that is detailed, accu-rate, and up-to-date.

The SAP Businessobjects Financial consolidation application helps you recover critical time in your closing and management reporting cycles – without sacrificing the controls or auditing capabilities you need for today’s com-plex compliance environment. The soft-ware supports the robust consolidation processes you need to meet all legal and management reporting requirements. This support can help you minimize business risk, complete financial report-ing faster and with greater accuracy, improve compliance, and generate a fully documented audit trail that reduces external audit costs.

ing your bank make better-informed decisions, the application can minimize risk by helping to ensure the validity and accuracy of your data and reports. employees will also better understand the tasks they are expected to perform.

in balance sheet planning, for example, the application can help you calculate key figures such as net interest income. you can create forecasts based on the average volumes and rates of various products.

you can also use the application to:• Streamline your planning processes

– you can perform bottom-up and top-down financial and operational planning, collaborate on plans with other stakeholders, track plan ver-sions and changes, engage manag-ers in the planning process, and help ensure clear task ownership and accountability.

• Strengthen forecasting – Repeatable business activities can be streamlined into a specific set of steps called a business process flow. Business process flows are tightly linked to your planning and budgeting data to simpli-fy and strengthen the forecasting process. What-if modeling and scenario-planning functions let you assess budgeting reasonability in real time. Predictive analysis functions help you create rolling forecasts and incor-porate real-time actuals with historical data for effective forecast seeding.

The software can intelligently cope with multiple reporting channels, differing charts of accounts, account flows, and numerous analysis dimensions to retain past reporting frameworks. This helps finance professionals safely adapt to changing needs without rebuilding pre-vious reporting scenarios.

Supported by powerful analytical func-tionality, the software delivers informa-tion on a near-real-time basis, with updates that flow automatically from a reliable central data source. Advanced benchmarking functionality lets you pull in key data about your competitors, then use that data to measure and improve performance. Scenario-creation tools help you exploit this data for more accurate merger and acquisition planning.

The software makes it easier to meet complex statutory, regulatory, and com-pliance requirements. it can address multiple accounting standards and new legislation that requires additional iT support. it can help ensure that your bank’s investors and shareholders get the fast, easy access to data that they expect.

you can also use the software to:• Automate your consolidation

processes – you can handle currency translation adjustments, minority interest and equity calculations, inter-company reconciliations, and auto-matic cash flows through a standard user interface and intuitive wizards.


• Validate your data – Finance centers can see that incoming information fol-lows the expected timing and format; makes sense; is consistent, complete, and appropriately commented; and goes through the right auditable approval process.

• Improve business decisions – All processes, data, and users are con-nected to the application’s integrated data model to help ensure that every decision is based on data that is both consistent and reliable.

• Streamline legal reporting and disclosure – The software helps you more easily address the legal report-ing and disclosure requirements of the international Financial Reporting Standards (iFRS), the u.S. Sarbanes-oxley Act, and other regulations.

Profitability and Cost Management

many banks lack sufficient understand-ing of how their products and customers consume support services and contrib-ute to other indirect costs. They need detailed visibility into enterprise expenses for areas such as sales, distribution, finance, and iT to measure the financial performance of individual products and customers and make informed deci-sions that reduce costs and optimize profitability.

The SAP Businessobjects Profitability and cost management application can increase visibility into enterprise costs and help you align operational resourc-es and capacity with demand. This scal-able, enterprise-class application pro-vides reliable, on-demand analysis and scenario modeling that is user-friendly, rapid, and efficient. Activity-centric functionality extends the value of your profitability and cost management efforts.

in a single application, you get support for service costing and cross-charging, as well as driver-based and activity-

based planning and budgeting. you can identify business processes with the highest value to your organization and measure every cost and profitability for specific customer segments, products, and distribution channels.

The application can help you identify exactly where your profit is made through calculations of cost, revenue, average balances, or other relevant information. you can then use this infor-mation to support tactical and strategic decision-making processes by organi-zational unit, product, or individual cus-tomer. A common reporting environment provides data for balance sheets and profit-and-loss statements.

you can also use the application to:• Create agile analytical models –

employees across the enterprise can quickly build complex models for activity-based costing with an intui-tive, user-friendly interface and pre-defined dimensions. The models reflect true organizational costs and can be easily maintained, updated, and altered to meet changing busi-ness needs.

• Perform what-if analysis and scenario modeling on demand – you can model costs at any level in the organization, down to highly granular transaction data, and easily update and share models in real time. This can help you accurately invoice cross-charging of shared services for iT, HR, and finance.


roBuSt SolutionS for govErnAncE, riSk, And comPliAncEimPRoVing TRAnSPARency And mAximizing gRoWTH

effective governance, risk, and compli-ance processes have become a top pri-ority for banks in the wake of opera-tional losses, the increased emphasis on business process transparency, and concerns about infrastructure security and data privacy. At the same time, banks are anxious to avoid stiff penal-ties for failed regulatory compliance, the high cost of unmitigated business risk, and damage to their brand image or market position.

SAP Businessobjects governance, risk, and compliance solutions – along with software for analysis and reporting – can help you align your strategies with today’s risks and opportunities. They can help you put the proper controls in place to mitigate risk, ensure regulatory compliance, and execute your strategic goals. By providing the support you need to predict and minimize risk, these solutions can maximize business viabili-ty and continuity, increase your com-petitive advantage, and optimize oppor-tunities for growth. Through integrated, continuous control monitoring, they can also help you reduce the cost and bur-den of compliance.

To reduce the risk of fraud in invest-ment banking, for example, the solu-tions can help you analyze past instanc-es of fraud, identify process loopholes, and define measures that can prevent future abuses – such as improved con-trols for access to trading systems. in addition, you can compare daily trading volume with a meaningful threshold – defined by an exposure measure on the daily updated time series of trading vol-umes. Any volume that exceeds this threshold would have to be inspected, and the reason for the breach would have to be documented.

you can also use the solutions to:• Handle significant threats more

effectively – you can analyze risks in terms of severity and likelihood of impact and quickly identify risks of high impact or probability that exceed company-specific thresholds.

• Improve process control – The solu-tions help you implement controls for key risks through a combination of automated control monitoring, manual control tests, and self-assessments.

• Strengthen access control – The solutions are specifically designed to help banks address compliance with the Sarbanes-oxley Act and other regulatory mandates.


finAncE And riSk mAnAgEmEntPRoViding inFoRmATion AcRoSS youR inSTiTuTion

• Scalability and deployability – The SAP netWeaver technology platform gives SAP Bank Analyzer a state-of-the-art technological foundation that makes it highly suitable for a wide variety of iT environments. conse-quently, SAP Bank Analyzer can provide support to local and specialty banks as well as data centers and large, international institutions.

By providing the foundation for an open business process platform, SAP netWeaver helps banks bring innovative products and services to market long before their competitors. Leveraging SAP technology and service-oriented architecture, enterprises can build a business process platform that brings together the following key elements: • A repository of industry-specific

enterprise service definitions for transactional, customer-centric, and analytical banking

• Service-enabled applications that implement these enterprise services for managing deposits, loans, and collateral

• Support for composing, provisioning, and managing enterprise services and service-enabled applications

• A technology environment that helps users visually design and model busi-ness processes for execution within and beyond the boundaries of their enterprise

changes in the business environment are forcing banks to invest in an infra-structure that fosters information con-sistency, transparency, and quality for both finance and risk management. most industry-standard software that supports operational, portfolio, and risk management supports one of four solu-tion areas: management accounting, financial accounting, risk controlling, and regulatory reporting. This separation limits the possibility of using informa-tion across different departments and restricts a bank’s ability to leverage investments in multiple areas.

The SAP Bank Analyzer set of applica-tions can help your bank integrate valu-ations and calculations for various financial instruments – and measure success and risk based on your value chain. When combined with the SAP eRP application, SAP Bank Analyzer provides a modular, service-oriented, integrated finance and risk architecture that covers all your iT requirements for enterprise management (see Figure 4).

Based on globally recognized guide-lines for integrated finance and risk architecture, SAP Bank Analyzer can address today’s strategic requirements and help ensure that your iT architecture is future-proof. The software reflects three SAP goals for banks: • To provide consistent, high-quality

business information efficiently• To make this information available for

both decision support and reporting

• To help ensure that this information can be easily adapted to changing needs

The core features of an integrated finance and risk architecture include: • A layered model – Source data,

valuations, and results data areas and functions are clearly separated to facilitate adaptation to new requirements.

• Integration cornerstones – SAP Bank Analyzer is the consolidated source for valuation processes (the source data layer) for any kind of financial instrument. Valuation results are stored for a variety of purposes (the results data layer). Together, the source data layer and the results data layer combine the benefits of integration with an open and modular architecture.

• Standardization – Providing a harmo-nized data model for both source and results data fulfills the diverse infor-mation needs of the banking industry.

• Modularity – SAP Bank Analyzer is built along modular lines to support incremental implementation based on your requirements.

• Openness – Standard interfaces let you integrate partner products or proprietary tools into the architecture. This helps you optimize the software for your needs.

• Service orientation – information is provided as a service to let you reuse data for new or changed business needs.


• Determine financial reporting data – Subledger functions produce detailed reporting data for financial instruments. you can post business transactions and execute calculations and valua-tions on a single contract level. The criteria used to create items in the bal-ance sheet and profit-and-loss state-ment are flexible enough to meet your particular business and reporting needs.

Profit Management

Banks must also review their perfor-mance in terms of optimizing costs and maximizing profit. SAP offers solutions to help banks identify exactly where they make their profit. The solutions use comprehensive costing approaches to calculate cost, revenue, and other rele-vant figures – including funds-transfer prices on the transaction level.

information about cost drivers is includ-ed through an activity-based costing approach. (See the previous section “Profitability and cost management.”) The profit management software sup-ports tactical and strategic decision-making processes in banks on various levels – such as organizational units, products, or customers. This is done by an analysis of profit and cost figures in reporting, such as contribution margin schemes.

The SAP for Banking solution portfolio provides the integration and coordination of information that banks require for key financial and management accounting activities and the creation of related reports. SAP for Banking can also inte-grate accounting activities with other analytical banking areas, such as risk management. in addition, the software can help you:• Value and post financial instruments

– classic subledger functions within SAP for Banking solutions help you value financial instruments under today’s regulations, post these valua-tions, and post business transactions. you get full support for iFRS and the international Accounting Standards (iAS), including iAS rules 32 and 39.

Financial Accounting

Today banks face complex reporting needs driven by internal management requirements and external rules for regulatory disclosure. Top-tier banks in the european union must meet new financial accounting requirements under the iFRS. increasingly, banks outside europe are adopting iFRS requirements as well. meeting these goals demands enhanced support for valuing and post-ing financial instruments and determin-ing financial reporting data. now more than ever, banks must fully integrate their accounting data and processes more seamlessly and coordinate the internal and external reporting of finan-cials and risk.

Figure 4: Software for Finance and Risk Management from SAP

Financial product valuation

Finance and Risk Management

Reporting and financial performance management

cost of operations

Results data layer

Source data layer

Valuation layer

General ledger

Risk ManagementBasel IIAsset liability managementLimit managementRegulatory reportingCredit portfolio management

AccountingFinancial accountingmanagement accountingProfit management


Basel II

The capital adequacy framework within Basel ii promotes improvements in risk management and regulatory capital allocation for the estimated 5,000 banks in more than 100 countries that are likely to fall under the regulations. To be competitive, many other banks will voluntarily adopt the framework. doz-ens of top european institutions now use the SAP Basel ii application to satis-fy the rigorous and evolving require-ments of Basel ii – and establish a technology and process framework that helps ensure baseline standards for understanding and managing risk.

SAP Basel ii can help your institution meet all Basel ii requirements for risk exposure and capital adequacy and implement risk-mitigating supervisory review and disclosure processes. The solution also integrates data and analyt-ics in a flexible financial database that accommodates all standard financial products – making it a strategic founda-tion for ongoing compliance and delivery of business insight.

SAP Basel ii integrates internal and external credit-risk management on a single platform and supports all Basel ii–specified methods for credit-risk calcu-lation – from the standardized approach to the advanced internal ratings-based (iRB) approach. you can also integrate your compliance activities into other

strategic information-gathering initiatives – and satisfy your oversight obligations – while returning value to your bottom line. in addition, the software can help you:• Perform robust calculations for

credit risk and capital adequacy – you can calculate default, dilution, settlement, and residual-value risk. The application supports the standard, comprehensive standard, foundation iRB, and advanced iRB calculation approaches that provide values for risk-weighted assets and expected loss.

• Help ensure strong support for super-visory review – SAP Basel ii supports the reporting transparency and trace-ability necessary for the supervisory review required under Basel ii.

• Use flexible functions for disclosure and reporting – SAP Basel ii provides significant flexibility in designing, creating, and expanding credit-risk reports. it lets you access this infor-mation at regular intervals according to your particular needs.

• Employ integrated data management – SAP Basel ii integrates data man-agement by incorporating both histori-cal and financial databases, each of which serves a distinct function.

Limit Management

increasingly, banks must closely tie risk management to profitability. This requires setting appropriate limits that keep your exposure under tight control.

The SAP Limit management application delivers enhanced limit management features that help you measure, analyze, and control risk throughout your enter-prise. This global limit solution is avail-able practically around the clock and can handle calculations for all your transactions. The software has a fully integrated framework that can manage limits for overall bank controlling. you gain greater control of risk limits for your bank as a whole, as well as control at the portfolio and business partner levels. SAP for Banking also offers an online limit solution with integrated limit control for trading book transactions. in addition, the software can help you:• Perform comprehensive calculations

– SAP Limit management can handle all methods of calculating exposure. you can create different limits for counterparty and issuer risk and set limits for settlement risks. you can differentiate between primary and secondary credit risks and take into account whatever collateral items are necessary.

• Institute active limit management – The application uses a dual-control feature that requires active limit authorization by two users. you can further control the limit management process by automatically sending a message to any recipient you choose on a specified date. you can also increase the limit amount for a speci-fied period of time and lock the limits of a business partner.


To meet these challenges, you need a highly flexible data integration platform that you can restructure as needed over time. in addition to addressing changing market and regulatory environments, this platform must ensure data completeness, accuracy, and availability and provide high-volume processing functionality.

The Asset and Liability management application by SAP and Sungard is a market-leading solution for managing interest rate, foreign exchange, and liquidity risks. Financial institutions gain full support for funds transfer pricing and hedge management practices under iAS 39. in addition, the software can help you:• Manage risk more effectively – The

application can help you measure, monitor, and control interest rate, foreign exchange, and liquidity risks. A more accurate and future-oriented approach toward risk measurement can help you improve profitability.

• Improve process integration – you can integrate asset liability manage-ment processes with processes for hedge accounting, enterprise risk man-agement, and profitability analysis.

Credit Portfolio Management

given today’s unstable credit markets, it is particularly important that banks have effective methods for monitoring and managing credit risk. This involves the oversight of assets such as loans, bonds, committed lines, letters of credit, and counterparty risk stemming from oTc derivatives – both of a bank’s overall portfolio and selected subportfolios, such as those for specific business units.

• Use online limit checks – The soft-ware offers a cross-trading system that can check limits for all of your bank’s products online against the relevant transaction exposure levels for individual calculations. After the online check, new transactions also appear in reports and can be called up directly.

• Expand your reporting capacity – Standard limit-management reports created by the application show spe-cific limits and their utilization. you can also create reports based on individu-al risk characteristics and access reports on individual transactions that provide exposure calculations in detail.

Asset Liability Management

Regulatory requirements such as Basel ii and iAS 39 demand more accurate and comprehensive measurement of inter-est rate, foreign exchange, and liquidity risks. As a result, asset liability manage-ment professionals must focus simulta-neously on detailed risk calculations involving earnings and economic value.

As market competition heats up, you must also increase your institution’s economic value and earnings stream by transforming the precise and proactive measurement and management of your balance sheet’s risk-and-return profile into a strategic advantage. in addition, you must contain iT costs and integrate asset liability management activities with those for enterprise risk manage-ment and accounting.

With effective management of its credit-risk portfolios, a bank can align the risk and return for those portfolios and improve its risk-adjusted return on eco-nomic capital. This can be achieved by hedging or by engaging in credit-risk-bearing positions. SAP Bank Analyzer integrates best-in-class credit portfolio models to quantify the economic capital within the bank’s credit volume. credit portfolio models of third-party vendors can be integrated smoothly as well.

Regulatory Reporting

obtaining the quality information you need for financial or risk reporting can be difficult if you use multiple data ware-houses or have software from different sources that is cumbersome and expen-sive to reconcile. your bank cannot function effectively if there is wide-spread data redundancy or diminished confidence in the accuracy of essential business and regulatory information. SAP for Banking solutions provide full support for the industry reporting require-ments that banks face today. Predefined standard reports help ensure a rapid return on your investment. integration with flexible, user-friendly tools in the SAP netWeaver Business Warehouse component enhance these reports through state-of-the-art technology. in addition to support for the require-ments of Basel ii, SAP for Banking can help you handle reporting required by the committee of european Banking Supervisors – as well as your internal reporting needs. in addition, you can use the software to:


and map this data to create xBRL-instance documents. And because SAP Businessobjects xBRL Publishing comes with a leading xBRL engine, you can be confident that your docu-ments are valid for the taxonomies you use. it includes well-documented application program interfaces and full functionality for distributing infor-mation to other data warehouses.

• Improve decision making – SAP for Banking can help you convert data into actionable information and help ensure that it is delivered at the right time to the right person in the right format to support effective business decisions.

• Access reports on demand – SAP for Banking supports interactive informa-tion analysis via both the internet and mobile devices. you can make ad hoc queries via the internet. information-broadcasting tools let you distribute information from different sources, in different formats, using different modes and channels.

• Implement industry best practices – Preconfigured content uses best-practice models. The SAP Businessobjects xBRL Publishing application by uBmatrix works together with SAP consolidation and financial reporting applications to enable your staff members to prepare extensible Business Reporting Language (xBRL) report submissions right from their desktops. now finance and compliance teams can create, interact with, customize, and validate all kinds of xBRL documents – quickly and efficiently. Preparers first assemble financial reports using:– SAP Businessobjects Planning

and consolidation– SAP Businessobjects Financial

consolidation– SAP Business Suite software– SAP Basel ii application – SAP Accounting for Financial

instruments application you can then use SAP Businessobjects

xBRL Publishing to tag, transform,


At the same time, the applications make it easier to adapt risk calculations to the needs of various internal users of risk reports. Analyses of credit risk can be based on book value for users in the lending area, for example, and on present value for users in the trading area. you can further customize your analyses with external price calculators.

By providing a self-service environment for finance and business users, the software helps involve more employees as strategic advisors to the business without having to rely on your iT depart-ment. you get greater support for strat-egy management, business planning, profitability management, and financial consolidation. in addition, the software can help:• increase the return on other iT

investments• improve efficiency and productivity• Lower costs• Heighten employee satisfaction • Foster greater collaboration• increase your competitive advantage

Make the Most of Your Data

For more information about the many ways that the analytical applications from SAP can help your business, call your SAP representative or visit us online at www.sap.com/banking.

By helping your bank comply with a constantly changing array of accounting and regulatory reporting requirements, the analytical banking applications from SAP make it easier to align capital more closely with changing market conditions and legal requirements. in the process, you increase the confidence of your stakeholders.

By enhancing the accountability and transparency of your financial and profit-ability data, you help managers make better-informed business choices. data analysis that is more automatic and streamlined can also be more cost-effective. enhanced reconciliation of information for management, statutory, risk, and regulatory reporting can improve operational efficiency.

using the same market data, transaction data, and calculation engines for risk analysis means that risk management within your bank can be more consistent and effective. you gain greater control over both static and dynamic market risks and can handle risk for a broad range of products. you can perform nominal or book value, present value, and risk-adjusted calculations simulta-neously and apply the results to other risk evaluations. inclusion of risk-reducing measures in the display of net expo-sure gives you a complete risk picture for greater accuracy in other business calculations.

A vAriEty of BuSinESS BEnEfitSimPRoVe deciSion mAking, comPLiAnce, And youR uSe oF cAPiTAL


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Summary Analytical solutions from SAP can help banks build a centralized source of accurate, up- to-date information and make that information available throughout their institutions. The solutions provide robust support for business intelligence and financial performance man-agement – as well as for the management of governance, risk, and compliance. A fully integrated architecture for finance and risk management helps banks more effectively handle valuations for a wide range of financial instruments and measure success and risk across their value chains.

Business Challenges • meet new regulatory and operational requirements that demand greater transparency• improve data consistency, accuracy, and timeliness• Reduce the effort and cost of data reconciliation required by multiple silos of information• improve control over business processes and the quality of products and services

New Features• Business intelligence – gain quick access to data (online, offline, or off-site) as well

as best-in-class, high-volume enterprise reporting• Financial performance management – Tap robust tools for strategy management,

business planning, financial consolidation, and profitability and cost management• Governance, risk, and compliance – Put the proper controls in place to mitigate risk,

help ensure regulatory compliance, and execute your strategic goals• Finance and risk management – integrate valuations and calculations for a wide range

of financial instruments and measure success and risk based on your value chain

Business Benefits • Comply with new accounting and regulatory reporting requirements• Align capital more closely with changing market conditions and legal requirements• Increase stakeholder confidence• Enhance the accountability and transparency of your financial and profitability data• Make more informed business decisions • Improve operational efficiency and manage risk more effectively

For More Informationcall your SAP representative, or visit us online at www.sap.com/banking.

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Analytical banking solutions from sap