Dear SAP Banking Community members.
Last week we talked about an interesting example, in which a company, trying to hedge the market risk associated to its commercial activities, failed to do it and suffer enormous losses.
We also saw how the company was exposed to other risks (credit risk) that probably would have generated losses if the market conditions would have been different.
Integrated risk management has proved to be a mandatory requirement if we want to build an stable financial system, but unfortunately the technology available in many banks is far from offering an integrated model capable of evaluating globally their risk exposures.
Some weeks ago I was invited to give a short explanation to some Bank executives about the SAP Financial Database.
A very interesting characteristic of the Bank business model is that its main business is lending funds to other banks through investments in which the bank is exposed, not to the default of the client itself, but to other parties which guarantee the payment if the client fails his obligation. Those credit risk transfer relations can have several levels.
Of course, the bank registered in the contracts the relation of guarantees for every lending but currently it was very difficult for them evaluate the default risk associated to every creditor, guarantor, and combination of them, as it was difficult to represent on their risk management system all the credit risk relationships.
That’s one of the main advantages of the Bank Analyzer Financial Database, by using Descriptive Characteristics we can define freely the business segments representing the Bank business model.
But even more, the Financial Database is used and shared by all the analyzers so it lets the bank to evaluate the risks in an integrated way.
Unfortunately, there was no time for talking in detail of the advantages of this integrated model, but we can talk about it here another week.
Looking forward to read your comments.
Kindest Regards.
Ferran.
Last week we talked about an interesting example, in which a company, trying to hedge the market risk associated to its commercial activities, failed to do it and suffer enormous losses.
We also saw how the company was exposed to other risks (credit risk) that probably would have generated losses if the market conditions would have been different.
Integrated risk management has proved to be a mandatory requirement if we want to build an stable financial system, but unfortunately the technology available in many banks is far from offering an integrated model capable of evaluating globally their risk exposures.
Some weeks ago I was invited to give a short explanation to some Bank executives about the SAP Financial Database.
A very interesting characteristic of the Bank business model is that its main business is lending funds to other banks through investments in which the bank is exposed, not to the default of the client itself, but to other parties which guarantee the payment if the client fails his obligation. Those credit risk transfer relations can have several levels.
Of course, the bank registered in the contracts the relation of guarantees for every lending but currently it was very difficult for them evaluate the default risk associated to every creditor, guarantor, and combination of them, as it was difficult to represent on their risk management system all the credit risk relationships.
That’s one of the main advantages of the Bank Analyzer Financial Database, by using Descriptive Characteristics we can define freely the business segments representing the Bank business model.
But even more, the Financial Database is used and shared by all the analyzers so it lets the bank to evaluate the risks in an integrated way.
Unfortunately, there was no time for talking in detail of the advantages of this integrated model, but we can talk about it here another week.
Looking forward to read your comments.
Kindest Regards.
Ferran.
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