Dear,
Recently, I was invited to make a presentation about Analytical Banking; particularly, about the ALM capabilities of Bank Analyzer.
Today, SAP BA does not include the necessary functionalities for being considered an ALM solution, but this does not mean that it shouldn’t be seriously considered in an ALM roadmap.
In fact, SAP has the best value proposition for building, not only a very powerful ALM solution, but a Capital and Liquidity Optimizer; let’s see why.
Building an ALM solution requires five blocks of functionalities.
- Transactional Banking data cleansing and storage. Covered by the ETL functionalities of Netweaver and the BA - Source Data Layer.
- Counterparty Risk Analysis. Covered by the CRA module of BA.
- Market Risk Analysis. Covered (with limitations) by the Strategy Analyzer module of BA.
- Liquidity Analysis. Covered by Liquidity Risk Management powered by SAP HANA.
- ALM Simulation functionalities (Simulated Transactions, Market Data Generation, etc.). Not yet available.
If the question was; “is SAP BA an ALM module?”
Maybe the answer should be no.
But if the question was; “is SAP BA the best option to consider in an ALM roadmap?”
Then the answer could be yes. There’re several reasons for justifying this answer.
- Four out of the five necessary building blocks for a robust ALM solution are already covered by BA. Three of them are completely covered; the fourth (Market Risk) is covered with some limitations.
- Building a strong ALM solution requires a multi-purpose and flexible architecture, capable of managing Accounting, Credit, Market and Liquidity Risk Data in an integrated way. There’s no better architecture for this than the Integrated Financial and Risk Architecture of BA.
- Accepting that the ALM simulation functionalities are not available yet in BA, this does not mean that they’re not going to be available in future releases (maybe even sooner than expected).
Let’s focus on the last point, as it seems to be the weak point of Bank Analyzer, in front of other competitors like Sunguard.
Implementing the ALM simulation functionalities must be the last step in a coherent ALM and Capital Optimization Roadmap. It would be nonsense to try to build ALM simulation scenarios if we haven’t built a robust Accounting and Liquidity System. And the Accounting and Liquidity functionalities must be supported by a strong foundation of good quality Transactional Data.
Achieving this stage requires a full implementation project of Accounting for Financial Instruments and the complete modelization of the necessary Primary Objects in the SDL, plus all the ETL transformations. This is a challenging project that will take a while to bring to a successful go-live.
During that time, it is likely that SAP will enhance the ALM simulation functionalities of BA.
I implemented the ALM solution of SEM-Banking in the past; and based on that experience, I think than enhancing the Strategy Analyzer module of Bank Analyzer and taking advantage of the ALM functionalities of SEM Banking, rebuilt over the IFRA Architecture, it will make Bank Analyzer a very robust, best of breed ALM solution.
SAP has the know-how; they just have to re-use it for BA.
The real issue is the scarcity of consultancy resources capable of implementing and explaining BA, which can delay the roadmap, even more than what SAP will take to develop the ALM Simulation functionalities in BA.
Again, the challenge is not developing great software, but explaining why is so great and making it work.
Regards,
Ferran.
Recently, I was invited to make a presentation about Analytical Banking; particularly, about the ALM capabilities of Bank Analyzer.
Today, SAP BA does not include the necessary functionalities for being considered an ALM solution, but this does not mean that it shouldn’t be seriously considered in an ALM roadmap.
In fact, SAP has the best value proposition for building, not only a very powerful ALM solution, but a Capital and Liquidity Optimizer; let’s see why.
Building an ALM solution requires five blocks of functionalities.
- Transactional Banking data cleansing and storage. Covered by the ETL functionalities of Netweaver and the BA - Source Data Layer.
- Counterparty Risk Analysis. Covered by the CRA module of BA.
- Market Risk Analysis. Covered (with limitations) by the Strategy Analyzer module of BA.
- Liquidity Analysis. Covered by Liquidity Risk Management powered by SAP HANA.
- ALM Simulation functionalities (Simulated Transactions, Market Data Generation, etc.). Not yet available.
If the question was; “is SAP BA an ALM module?”
Maybe the answer should be no.
But if the question was; “is SAP BA the best option to consider in an ALM roadmap?”
Then the answer could be yes. There’re several reasons for justifying this answer.
- Four out of the five necessary building blocks for a robust ALM solution are already covered by BA. Three of them are completely covered; the fourth (Market Risk) is covered with some limitations.
- Building a strong ALM solution requires a multi-purpose and flexible architecture, capable of managing Accounting, Credit, Market and Liquidity Risk Data in an integrated way. There’s no better architecture for this than the Integrated Financial and Risk Architecture of BA.
- Accepting that the ALM simulation functionalities are not available yet in BA, this does not mean that they’re not going to be available in future releases (maybe even sooner than expected).
Let’s focus on the last point, as it seems to be the weak point of Bank Analyzer, in front of other competitors like Sunguard.
Implementing the ALM simulation functionalities must be the last step in a coherent ALM and Capital Optimization Roadmap. It would be nonsense to try to build ALM simulation scenarios if we haven’t built a robust Accounting and Liquidity System. And the Accounting and Liquidity functionalities must be supported by a strong foundation of good quality Transactional Data.
Achieving this stage requires a full implementation project of Accounting for Financial Instruments and the complete modelization of the necessary Primary Objects in the SDL, plus all the ETL transformations. This is a challenging project that will take a while to bring to a successful go-live.
During that time, it is likely that SAP will enhance the ALM simulation functionalities of BA.
I implemented the ALM solution of SEM-Banking in the past; and based on that experience, I think than enhancing the Strategy Analyzer module of Bank Analyzer and taking advantage of the ALM functionalities of SEM Banking, rebuilt over the IFRA Architecture, it will make Bank Analyzer a very robust, best of breed ALM solution.
SAP has the know-how; they just have to re-use it for BA.
The real issue is the scarcity of consultancy resources capable of implementing and explaining BA, which can delay the roadmap, even more than what SAP will take to develop the ALM Simulation functionalities in BA.
Again, the challenge is not developing great software, but explaining why is so great and making it work.
Regards,
Ferran.
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