Beyond Basel II: Evaluating the Financial and Credit Risk Solution Vendors 2008

by Cubillas Ding, April 14, 2008

Abstract

London, United Kingdom 14 April 2008

The pressure to adhere to aggressive Basel II deadlines for many first-wave institutions has meant that additional business benefits such as better management of risk/returns, enhanced pricing, and more sophisticated risk management practices have largely been left by the wayside. Celent urges firms to look beyond regulatory basics to systematically realise value from their risk management initiatives.

Basel II implementations have been progressing for the past five years within first-wave institutions. This momentum has reached significant milestones in Europe and, to varying degrees, in the Asia-Pacific region and elsewhere. The past few years have seen large-scale, resource-intensive projects deliver the new Basel framework, with firms spending on average between $50-$100million (or 3-7bps of assets) on their Basel II programmes. However, despite good progress towards deadlines this year for first-wave institutions, many firms have focused on completing the regulatory aspects of Basel II.

In a new report, Beyond Basel II: Evaluating the Financial and Credit Risk Solution Vendors, Celent assesses offerings from ten vendors. The report examines the state of the market for risk management solutions and the innovative vendors that are helping institutions transition beyond regulatory basics.

"Looking forward, as Asian, Eastern European, Middle Eastern and most recently, US institutions begin their initiatives in earnest, there are lessons to be learned from first-wave projects. From an IT perspective, data quality issues, technology integration challenges, and adaptability of risk management systems are often cited as concerns in realising the full benefits of risk initiatives," says Cubillas Ding, Celent senior analyst and author of the report. "Technology considerations and the solutions adopted stand as major underpinnings in realising success."

This report uncovers market trends in risk management, as well as broader capital planning and financial analysis practices. It also examines the solution aspects of financial and credit risks, as well as implementation lessons in the context of Basel II related initiatives. This report is intended to be a guide for institutions who are planning their risk initiatives, implementing risk management solutions, or migrating their businesses to the new Basel II regime.

The 75-page report contains 21 figures and 20 tables. The vendors analysed in detail include: Algorithmics, Fermat, Financial Architects, IRIS, Oracle/Reveleus, Misys Almonde, QRM, SAP, SAS, and SunGard. A table of contents is available online.

Members of Celent's Retail Banking, Wholesale Banking, Retail Securities & Investments, and Institutional Securities & Investments research services can download the report electronically by clicking on the icon to the left.  Non-members should contact info@celent.com for more information.  

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

London, United Kingdom 14 April 2008

Executive Summary 04
Introduction 07
Business and Technology Drivers 09
  First-Wave Basel II Institutions Pressured to Demonstrate Tangible Business Benefits 09
  Evolving Risk Management Practices Beyond Basel II 11
  Expanding Adoption of Economic Capital Frameworks 15
  Economic Capital Management and Basel's Pillar 2 16
  Redefining Finance and Risk Activities 18
  Implications from the Market Crisis 21
Financial and Credit Risk Management 25
  Architecture System Overview 25
Solution Overviews 27
  Criteria For Inclusion 27
  Vendor Overview 28
  Scope of Offering 30
Vendor Profiles 31
  Algorithmics 31
  Fermat 34
  Financial Architects 37
  IRIS Integrated Risk Management 39
  Misys Almonde 42
  Oracle/Reveleus 44
  QRM 46
  SAP 49
  SAS Institute 52
  SunGard 54
Celent's ABCD Vendor Analysis 58
  Overall Vendor Rankings 60
  ABCD Ranking Breakdowns 60
  Advanced Features and Functionality 61
  Breadth of Functionality 62
  Client Base 62
  Depth of Client Services 64
Solution Strategies and Implementation Lessons 65
  Solution Considerations 65
  Architecture Considerations 67
Conclusions -- Looking Forward 71
Appendix A 73
  Risk Management Ecosystem -- Primary Components 73
  Peripheral Applications and Ecosystem Linkages 74
Appendix B 76
  Technology Platform Overview 76
  Solution Pricing 78
  Maintenance and Support 79

 

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