® ifb Annual 2008-17.09-RZ-PROOF_Innenteil_E.indd - ifb AG
® ifb Annual 2008-17.09-RZ-PROOF_Innenteil_E.indd - ifb AG
® ifb Annual 2008-17.09-RZ-PROOF_Innenteil_E.indd - ifb AG
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07/08<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08<br />
Transparency
<strong>ifb</strong> <strong>Annual</strong> 07/08 2<br />
Revenue/Employees Range of Services<br />
70,0<br />
60,0<br />
50,0<br />
40,0<br />
30,0<br />
20,0<br />
10,0<br />
0<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
Revenue of the <strong>ifb</strong> group (Mio. EURO)<br />
2003 2004 2005 2006 2007<br />
Employees of the <strong>ifb</strong> group (at the end of the year)<br />
2003 2004 2005 2006 2007
Expert conception<br />
and implementation<br />
Banking<br />
Software<br />
and introduction<br />
Expert conception<br />
and implementation<br />
Insurance<br />
Software<br />
and introduction<br />
Expert conception<br />
and implementation<br />
Corporates<br />
Software<br />
and introduction<br />
Total Bank Controlling<br />
Sales Management/Intensifi cation<br />
Business Segment Accounting/Planning<br />
Productivity Management<br />
Return Management<br />
Trade/Treasury<br />
Risk Management/Controlling<br />
Reporting System/Supervisory Law<br />
Accounting<br />
Financial Strategy<br />
Merger/Restructuring<br />
Internal Auditing<br />
Reporting<br />
Forecasting/Budgeting<br />
Core Banking Systems<br />
IT-Strategy<br />
Organisation/Processes<br />
Partner products and<br />
additional solutions<br />
In-house products<br />
Actuarial Practice<br />
Capital Assets<br />
IT-Strategy<br />
Organisation/Processes<br />
Risk Management /Controlling<br />
Reporting System/Supervisory Law<br />
Accounting<br />
Reporting<br />
Internal Auditing<br />
Forecasting/Budgeting<br />
Partner products and<br />
additional solutions<br />
In-house products<br />
Risk and Strategy Management<br />
Planning and Controlling<br />
Process and Cost Management<br />
Corporate Governance and Compliance<br />
Reporting<br />
IT-Performance and IT-Infrastructure<br />
Treasury Management<br />
IT-Strategy<br />
Organisation/Processes<br />
Business Performance Management<br />
Accounting<br />
Reporting<br />
Partner products and<br />
additional solutions<br />
In-house products <strong>ifb</strong>-OKULAR <strong>®</strong><br />
ProKoRisk <strong>®</strong><br />
ARIS<br />
egip<br />
Microsoft<br />
SAP Balance Analyzer, PAIA, Hedge Management<br />
SAP Bank Analyzer, SDL, Data Load Management<br />
SAP Basel II Solution, Limit Manager, GRC<br />
SAP Deposits Management, SAP ERP, Loans, CMS<br />
SAP SEM Banking<br />
Products for<br />
CRM<br />
ERP<br />
Accounting<br />
Reporting<br />
BPM (Hyperion, BO Finance, SAP-BPC)<br />
Auditing<br />
Treasury and Trade<br />
<strong>ifb</strong>-OKULAR <strong>®</strong> Total Bank Controlling<br />
<strong>ifb</strong>-OKULAR <strong>®</strong> IFRS<br />
ARIS<br />
Microsoft<br />
Process 2<br />
SAP Products, IFRA<br />
Additional products for<br />
ERP<br />
Accounting<br />
Reporting<br />
Auditing<br />
<strong>ifb</strong>-OKULAR <strong>®</strong><br />
ProKoRisk <strong>®</strong><br />
ARIS<br />
egip<br />
Microsoft<br />
Process 2<br />
midlake <strong>®</strong><br />
SAP Produkte, GRC<br />
Additional products for<br />
ERP<br />
Accounting<br />
Reporting<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 3
<strong>ifb</strong> <strong>Annual</strong> 07/08 4<br />
Contents<br />
Contents<br />
Foreword<br />
6 Introduction by the Chairmen of the Supervisory Board<br />
8 Letter to our business partners<br />
Interview<br />
10 “Risk management should not blank out any relevant factor“<br />
Prof. Axel A. Weber, President of the Deutsche Bundesbank talks to Claus Stegmann,<br />
<strong>ifb</strong> group Partner and member of the <strong>ifb</strong> <strong>AG</strong> Executive Board<br />
Business Intelligence Technology<br />
14 Ten questions put to Marco Kiernan, head of the new<br />
<strong>ifb</strong> group service line ‘BI Technology‘<br />
Banking<br />
16 Total solution for controlling, reporting and planning<br />
Hartmut Görlitz, Ulrich Steinhauer, LBS Norddeutsche Landesbausparkasse Berlin-Hannover<br />
Ralph Beckers, <strong>ifb</strong> group<br />
18 Liquidity at Risk: liquidity risk under control<br />
Dr. Bernd Walter, Kasseler Sparkasse<br />
Swetlana Reykhrudel, <strong>ifb</strong> group<br />
20 Integrated counterparty risk measurement on the basis<br />
of a hybrid model<br />
Thomas Rempel-Oberem, <strong>ifb</strong> group<br />
22 The challenges of a transactional banking project – akin to replacing<br />
an aircraft engine in mid-fl ight<br />
Jürgen Mauk, <strong>ifb</strong> group<br />
24 Communication and documentation requirements necessitate<br />
a change in paradigm<br />
Dr. Rainer Merkt, Marek Ristock, <strong>ifb</strong> group<br />
26 Subprime crisis as a case in point: how stress tests create<br />
liquidity risk transparency<br />
Dr. Adrian Ainetschian, Tobias Richert, <strong>ifb</strong> group
28 European Bank for Reconstruction and Development<br />
optimises limit systems<br />
Olaf Weick, <strong>ifb</strong> group<br />
30 Governance, risk and compliance in banks:<br />
transparency in risk management – Pillar 2 as a GRC initiative<br />
Ralf Huff, Dr. Kai-Oliver Klauck, <strong>ifb</strong> group<br />
Insurance<br />
32 Professional management of operational risk<br />
Börge Thiel, AR<strong>AG</strong> Rechtsschutz<br />
Lars Tybussek, <strong>ifb</strong> group<br />
34 Insurance company ‘Versicherungskammer Bayern‘ to implement<br />
IFRS accounting as of 2009<br />
Hannes Polit, <strong>ifb</strong> group<br />
36 Preparations for Solvency II begin with the 9th amendment<br />
of the Insurance Supervision Act (V<strong>AG</strong>) and MaRisk (VA)<br />
for insurance<br />
Nicole Fopma, Thomas Rauschen, <strong>ifb</strong> group<br />
Corporates<br />
38 E.ON as a fi nancial service provider –<br />
the path to obtaining a licence in accordance with MiFID<br />
Dr. Jochen Handke, E.ON Energy Trading <strong>AG</strong><br />
Carsten Freilinger, <strong>ifb</strong> group<br />
40 Governance, risk and compliance in a mechanical<br />
engineering company<br />
Willy Holtkamp, <strong>ifb</strong> group<br />
42 Incorporating individual requirements within risk management<br />
Carsten Spieck, Hamburg Port Authority<br />
Holger Kruse, swb Erzeugung GmbH & Co. KG<br />
Manuela Nuhn, Lars Tybussek, <strong>ifb</strong> group<br />
46 The evolution of business intelligence<br />
Michael D. Hoffmann, <strong>ifb</strong> group<br />
Insight<br />
48 International activities<br />
50 07/08 events<br />
52 Selected projects<br />
55 Milestones<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 5
<strong>ifb</strong> <strong>Annual</strong> 07/08 6<br />
Introduction by the chairmen of the Supervisory Board<br />
Management change based on success<br />
and continuity<br />
The <strong>ifb</strong> group has continued its successful course<br />
throughout the past fi nancial year, in turn, clearly<br />
demonstrating the company’s exemplary<br />
continuity in terms of growth and development in<br />
performance from both a technical and business<br />
perspective. Today the company enjoys an excellent<br />
reputation throughout Europe and beyond, and<br />
is considered an extremely capable partner by the<br />
fi nancial sector and industrial, trade and service<br />
companies alike. The <strong>ifb</strong> group has continued to<br />
develop its activities with great success in the core<br />
areas of controlling, accounting, risk management,<br />
supervisory law and core banking. Moreover, the<br />
company has successfully used this foundation to<br />
reinforce its position as a provider of software,<br />
consulting and SAP services on an equally sustainable<br />
level, not least through its close networking<br />
with corporate partners such as SAP <strong>AG</strong>. This overall<br />
development is refl ected in the impressive results<br />
achieved in the last fi nancial year. As compared to<br />
the previous reporting period, consolidated turnover<br />
was successfully increased by 23% to EUR 59.4<br />
million, while maintaining an unchanged healthy level<br />
of profi t. One important change that took place<br />
at corporate management level was the withdrawal<br />
for personal reasons of Dr. Walter Herzog from his<br />
position on the <strong>ifb</strong> <strong>AG</strong> Executive Board following 18<br />
years of successful development work. Dr. Herzog<br />
will, however, remain active as a partner and consultant<br />
to the company and its clients. I would like<br />
to take this opportunity to once again express my<br />
heartfelt thanks for all his efforts, without which<br />
<strong>ifb</strong> <strong>AG</strong> would not exist in its present form.<br />
With its consulting services and software products,<br />
the <strong>ifb</strong> group is at the forefront of current developments,<br />
enabling us to provide our clients with<br />
a decisive competitive edge. The <strong>ifb</strong> group service<br />
portfolio offers companies from all sectors of business<br />
reliability in achieving integrated processing<br />
of the most exacting tasks pertaining to business<br />
management, statutory provisions and supervisory<br />
law. Ensuring the further development of this<br />
strength forms the focus of our corporate strategy;<br />
whereby the <strong>ifb</strong> group endeavours to achieve<br />
maximum fl exibility in relation to the continuing<br />
requirements of its clients.<br />
Helmut Späth<br />
Chairman of the <strong>ifb</strong> <strong>AG</strong> Supervisory Board (as of 1 July <strong>2008</strong>)<br />
The company organises its structures to allow it to<br />
offer a package of highly specialised services and<br />
products that are precisely tailored to individual<br />
needs. Some time back I decided to retire from<br />
my position at the head of the <strong>ifb</strong> <strong>AG</strong> Supervisory<br />
Board upon reaching the age of 75 and I am delighted<br />
to be able to conclude my task with a comprehensively<br />
positive status report. At the request of<br />
members of the Supervisory Board and the group<br />
of partners I will nevertheless continue to be a<br />
member of the board in the capacity of honorary<br />
chairman.<br />
On 8 April <strong>2008</strong>, Mr Helmut Späth, deputy chairman<br />
of the Versicherungskammer Bayern Executive<br />
Board was appointed the new chairman of the <strong>ifb</strong><br />
<strong>AG</strong> Supervisory Board with effect from 1 July <strong>2008</strong>.<br />
Mr Späth has already been advising the company’s<br />
most senior steering committee since 2006, which<br />
has provided us with the opportunity of ensuring<br />
careful preparation for the subsequently effected<br />
change in management. I would like to express my<br />
special thanks to Helmut Späth for his willingness<br />
to apply his extensive knowledge and longstanding<br />
management and committee experience to this<br />
important position in the future.<br />
I would like to wish him the very best of luck and<br />
success in his capacity as the new chairman of the<br />
<strong>ifb</strong> <strong>AG</strong> Supervisory Board and, as chairman of the<br />
<strong>ifb</strong> International <strong>AG</strong> Administrative Board, I very<br />
much look forward to being able to continue working<br />
together with him.<br />
Horst Will
Horst Will<br />
Chairman of the <strong>ifb</strong> <strong>AG</strong> Supervisory Board (to 30 June <strong>2008</strong>)<br />
Chairman of the <strong>ifb</strong> International <strong>AG</strong> Supervisory Board<br />
I would like to begin on a personal note by stating<br />
that, as a company stalwart, Horst Will has played a<br />
major role in providing the fi nancial industry with<br />
state-of-the-art management processes, products<br />
and services. At a very early stage, he recognised<br />
the requirement for and potential of information<br />
technology in terms of the application of new business<br />
methods and shaped this recognition into the<br />
basic concept of a corporate group that has since<br />
made a signifi cant contribution to the dissemination<br />
of future-orientated management concepts.<br />
I am delighted to be able to take up the position<br />
of chairman of the <strong>ifb</strong> <strong>AG</strong> Supervisory Board as his<br />
successor.<br />
In its capacity as an international software and consulting<br />
provider, the <strong>ifb</strong> group strives to assist its<br />
clients in achieving optimal structuring of their value<br />
chain, from development of the corporate strategy,<br />
new products and services, through to the fi ner<br />
points of technical implementation. Today, thanks<br />
to its Controlling, Accounting, Risk Management,<br />
Core Banking and Legal Reporting competence<br />
centres, the company is a leading international<br />
partner in all technical, organisational and information<br />
technology issues that concern the progressive<br />
structuring of company fi nance departments.<br />
Exemplary client proximity is the precondition that<br />
allows this strength to be exploited to the full, and<br />
it is in light of this aspect that the infrastructure of<br />
the branches within <strong>ifb</strong> group target markets will<br />
continue to be developed. Their task is to provide<br />
solutions supported by the group’s entire service<br />
portfolio that distinctly fulfi l the needs of individ-<br />
ual companies and local markets, while affording<br />
consideration to specifi c national legal framework<br />
conditions and the cultural characteristics of the<br />
market environment.<br />
As members of the <strong>ifb</strong> <strong>AG</strong> Executive Board, Claus<br />
Stegmann and Christian Moser are at the forefront<br />
of this strategic development. Moreover, in their capacity<br />
as directors of <strong>ifb</strong> International <strong>AG</strong>, they are<br />
also responsible for systematic development of the<br />
consulting and software markets in France, Austria,<br />
Luxembourg, Switzerland, the Central Eastern European<br />
countries, the Americas and Asia. In addition,<br />
within the scope of the BPMI network (Business<br />
Performance Management International), we also<br />
enjoy excellent international representation in<br />
many other countries, particularly those of Western<br />
Europe. Today, the <strong>ifb</strong> group is synonymous with<br />
sustainably high performance at the cutting edge<br />
of economic and technological requirements. The<br />
company’s interdisciplinary alignment, its leading<br />
role in terms of technical development and its culture<br />
of partnership-based and solution-orientated<br />
teamwork make it an attractive employer, giving<br />
rise to a high level of commitment. This indeed<br />
places us in an excellent position for the future.<br />
I would like to offer my sincere thanks to our clients<br />
for their continuing trust, which is refl ected in the<br />
success of the past fi nancial year. At the same time<br />
I would also like to express my personal thanks to<br />
the management and all the employees of the <strong>ifb</strong><br />
group.<br />
Helmut Späth<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 7
<strong>ifb</strong> <strong>Annual</strong> 07/08 8<br />
Letter to our business partners<br />
Growth based on resolute client focus<br />
Johannes Balling<br />
Partner, <strong>ifb</strong> Suisse <strong>AG</strong><br />
Claus Stegmann<br />
Partner, Member of the <strong>ifb</strong> <strong>AG</strong> Executive Board<br />
In the <strong>ifb</strong> <strong>Annual</strong> Report 07/08 we would like to<br />
present you with an up-to-date insight into the<br />
projects that we are currently undertaking together<br />
with our clients. These demonstrate that transparency<br />
– namely, the availability of up-to-date,<br />
consistent and reliable information – is not just<br />
some abstract demand. Rather, transparency paves<br />
the way for successful implementation of business<br />
strategies. Supporting companies in the achievement<br />
of this goal forms the focus of our activity.<br />
As a consultant and software provider, the <strong>ifb</strong><br />
group is enjoying a stable course of growth and<br />
counts amongst the leading specialists for integrated<br />
corporate, fi nancial and risk management. We<br />
offer our clients cutting-edge, customised total<br />
solutions that guarantee exemplary information<br />
and resolution quality. Our solutions are realised on<br />
an “end-to-end” basis – from the specifi c management<br />
concept, through to process structuring and<br />
implementation of information technology.<br />
The <strong>ifb</strong> group is systematically expanding its range<br />
of services in the areas of governance, risk and com-<br />
Volker Liermann<br />
Partner, <strong>ifb</strong> <strong>AG</strong><br />
Christian Moser<br />
Partner, Member of the <strong>ifb</strong> <strong>AG</strong> Executive Board<br />
Christoph Servaes<br />
Partner, <strong>ifb</strong> <strong>AG</strong><br />
pliance, risk/opportunity management and business<br />
intelligence technologies. We are also placing<br />
particular emphasis on potential-based corporate<br />
management, audit-related consulting and integrated<br />
group reporting. Integrated total bank management<br />
with <strong>ifb</strong>-OKULAR <strong>®</strong> is being further developed<br />
in close coordination with cooperative, public and<br />
private banks. Moreover, in addition to the existing<br />
analytical focus, the SAP for Banking business<br />
unit has been extended to include transactional<br />
banking, EAP fi nancials and real estate. Expansion<br />
of our central resources and capacity development<br />
through nearshore and offshore projects further<br />
complement these moves.<br />
In addition, the <strong>ifb</strong> group is also focussing on<br />
specifi c challenges being encountered within the<br />
insurance industry and is expanding its client base<br />
beyond the fi nancial services sector by providing<br />
progressive management solutions. The success of<br />
group-specifi c risk/opportunity management solutions<br />
using ProKoRisk <strong>®</strong> underlines the attractiveness<br />
of our integrated consulting and software services
Tanja Attermeyer<br />
Partner, <strong>ifb</strong> <strong>AG</strong><br />
Thomas Reichert<br />
Partner, <strong>ifb</strong> <strong>AG</strong><br />
in this area. The range of services has also been<br />
further enhanced through additional capacity in relation<br />
to the client-specifi c evaluation, selection and<br />
implementation of business intelligence systems.<br />
These developments refl ect a corporate strategy<br />
targeted at providing optimal support during each<br />
and every phase of our clients’ value chains. The <strong>ifb</strong><br />
group is continually increasing its core know-how in<br />
the fi eld of fi nance and management, while simultaneously<br />
and systematically extending its expertise<br />
to new corresponding subject areas. The constant<br />
growth of our client base in the banking sector,<br />
insurance industry and in the area of industrial,<br />
trade and service companies is a clear refl ection of<br />
the effectiveness of this strategy. The specifi cally<br />
driven and sector-related growth of the <strong>ifb</strong> group is<br />
matched by targeted expansion in new geographical<br />
markets, with the emphasis on North and South<br />
America, Eastern Europe and France. In this respect,<br />
development of market potential is founded on the<br />
establishment of regionally operating companies<br />
located in close proximity to their clients that are<br />
Christian Moser<br />
Member of the <strong>ifb</strong> <strong>AG</strong> Executive Board<br />
Oliver Greiner<br />
Partner, <strong>ifb</strong> International <strong>AG</strong><br />
Klaus Wiegand<br />
Partner, <strong>ifb</strong> <strong>AG</strong><br />
Dr. Walter Herzog<br />
Partner, <strong>ifb</strong> <strong>AG</strong><br />
able to offer the entire range of <strong>ifb</strong> group services.<br />
Throughout the past fi nancial year, the <strong>ifb</strong> group<br />
has achieved compelling results and is excellently<br />
placed to maintain further successful growth in the<br />
long-term. Against this backdrop, we look forward<br />
to the intensive teamwork with Mr Helmut Späth,<br />
who will be at the helm of the <strong>ifb</strong> <strong>AG</strong> Supervisory<br />
Board in future. At the age of 75, Mr Horst Will<br />
steps down from his position as chairman of the<br />
Supervisory Board and has subsequently been appointed<br />
honorary chairman of the same board. Over<br />
a period of two decades, he has decisively characterised<br />
the development of the <strong>ifb</strong> group through<br />
his entrepreneurial experience, decision-making<br />
strength and sound judgement and will continue to<br />
make his comprehensive know-how available within<br />
the capacity of his new position. We extend our<br />
heartfelt and personal thanks to him.<br />
On behalf of the partners and employees of the <strong>ifb</strong><br />
group, we would like to thank you for your interest<br />
in our efforts and trust you will fi nd the reading<br />
informative!<br />
Claus Stegmann<br />
Member of the <strong>ifb</strong> <strong>AG</strong> Executive Board<br />
Steffen Hortmann<br />
Partner, <strong>ifb</strong> <strong>AG</strong><br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 9
<strong>ifb</strong> <strong>Annual</strong> 07/08 10<br />
Focus Discussion<br />
“Risk management<br />
should not blank out<br />
any relevant factor<br />
Prof. Axel A. Weber, President of the Deutsche Bundesbank, talks<br />
to Claus Stegmann, <strong>ifb</strong> group Partner and member<br />
of the <strong>ifb</strong> <strong>AG</strong> Executive Board
Stegmann Professor Weber, we<br />
are delighted that you have taken<br />
the time for this interview and<br />
would like to extend a warm welcome<br />
to you here in Cologne. At<br />
the G7 spring summit in Washington,<br />
a number of important decisions<br />
on the way to go forward<br />
were taken. What were the key<br />
aspects of these?<br />
Weber In my opinion, the milestone<br />
of the G7 summit was acceptance<br />
of the Financial Stability<br />
Forum report, which presents<br />
purposeful and realistic proposals<br />
on improving the stability of<br />
fi nancial markets. This means<br />
that the market players are called<br />
upon to assume responsibility for<br />
improving risk management. In<br />
particular, this concerns liquidity<br />
risks, measurement practice,<br />
disclosure requirements and<br />
transparency. As a second group,<br />
the rating agencies are also in the<br />
spotlight, with the recommendations<br />
being specifi cally directed at<br />
avoiding confl icts of interest and<br />
drawing up a code of conduct.<br />
In Washington, we agreed that<br />
Basel II should now be introduced<br />
globally, including in the USA,<br />
with the utmost immediacy. At<br />
the same time, shortcomings<br />
in the regulations that became<br />
apparent during the turmoil in<br />
the capital market have to be<br />
resolved.<br />
Stegmann Have developments<br />
since the summer of 2007 given<br />
rise to an increased willingness to<br />
achieve a uniform body of global<br />
supervisory regulation?<br />
Weber From the outset, the aim<br />
of the regulators was to create a<br />
global equity capital standard in<br />
the form of Basel II. And I think<br />
there is a growing insight<br />
amongst all participants that<br />
regulatory arbitrage and regulatory<br />
differences within a global<br />
context should be avoided. But<br />
that is not just a problem of<br />
capital standards. There are still<br />
differences in accounting standards<br />
between both sides of the<br />
Atlantic, for example. The Basel<br />
Committee and the Financial Stability<br />
Forum (FSF) will be submitting<br />
proposals on this issue. What<br />
is important, however, is that,<br />
in the midst of resolving the turbulence,<br />
we do not start to tackle<br />
the amendment of accounting<br />
standards that are designed to<br />
create transparency. The principle<br />
of fair value accounting enhances<br />
transparency and, essentially, this<br />
should not be called into question.<br />
Nonetheless, we must pay<br />
attention to ensuring that specifi c<br />
provisions do not reinforce the<br />
procyclicality of the events.<br />
Stegmann In this respect, the<br />
question arises as to the actual<br />
role played by mark-to-market<br />
when market prices are indicators<br />
rather than traded prices, as we<br />
have seen in the subprime crisis.<br />
Indeed, relevant options are<br />
being discussed in the accounting<br />
committees.<br />
In Washington we agreed that<br />
Basel II should now be introduced<br />
globally, including in the USA,<br />
with the utmost immediacy.<br />
Weber These options already<br />
exist now with the three levels<br />
of accounting in the IFRS. The accounting<br />
system offers suffi cient<br />
options that must be applied by<br />
auditors in cooperation with the<br />
fi nancial institutions. I have the<br />
impression that some institutions<br />
often do not have suitable<br />
models available to enable them<br />
to make their own assessment of<br />
such assets. In those cases, it will<br />
be a matter of having to concentrate<br />
on indicators available in<br />
the market, like credit indices, for<br />
example.<br />
Stegmann In recent years, the<br />
banking industry has been called<br />
upon to implement new accounting<br />
and reporting methods<br />
which are, in fact, giving a very<br />
positive impetus to internal controlling.<br />
By contrast, the subject<br />
of liquidity management has<br />
been tending to play more of a<br />
subordinate role for some years<br />
now.<br />
Weber Basel II provides a number<br />
of starting points in that respect,<br />
too. The Supervisory Review Process<br />
(pillar 2 of the Basel II framework)<br />
allows supervisory bodies<br />
to take a more proactive stance<br />
in terms of banks’ risk management.<br />
The provisions concerning<br />
off-balance-sheet assets in pillar 1<br />
are a further improvement in this<br />
respect. The structural weakness<br />
of many off-balance-sheet<br />
structured investment vehicles<br />
lay in the fact that, frequently,<br />
long-term assets were held, while<br />
refi nancing was effected in the<br />
short-term through commercial<br />
paper. This construction was secured<br />
by the banks’ liquidity commitments,<br />
which, owing to their<br />
short maturities, were not subject<br />
to the Basel I capital requirements.<br />
Sensible risk management<br />
by the banks should never blank<br />
out any risk-relevant factor that<br />
can go through the liquidity line<br />
and come back to the bank as a<br />
contingent liability. In addition,<br />
as early as this summer, the Basel<br />
Committee on Banking Supervision<br />
will be presenting sound<br />
practices for the management<br />
of liquidity risks. The national<br />
regulatory authorities will then<br />
be required to implement these<br />
standards.<br />
Stegmann In implementing<br />
Basel II, a certain amount of deleveraging<br />
on the part of the<br />
banks has been apparent.<br />
However, the turbulence came<br />
too soon; indeed, a reduction in<br />
borrowing should really have<br />
occurred in 2007 with the introduction<br />
of Basel II.<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 11
<strong>ifb</strong> <strong>Annual</strong> 07/08 12<br />
Focus Discussion<br />
Weber Basel II focuses on and<br />
resolves many problems that we<br />
have been dealing with since the<br />
summer of last year. Nonetheless,<br />
we have been forced to concede<br />
that the implementation of<br />
Basel II in Europe and the USA<br />
has taken far too long. Ultimately,<br />
as a result of the transitional<br />
periods, for the overwhelming<br />
majority of German banks<br />
Basel II only took effect at the<br />
start of <strong>2008</strong>.<br />
Stegmann One important question<br />
is how far the crisis in the<br />
capital markets is spilling over<br />
into the economy as a whole.<br />
Weber In the US market, we are<br />
seeing a clear negative impact<br />
that is also affecting the pace of<br />
economic activity. Lending in the<br />
US has become appreciably more<br />
restrictive. In Germany, we have<br />
not yet witnessed any marked<br />
adverse effect on lending. In<br />
particular, with respect to what<br />
is possibly Germany’s most<br />
important sub-market, namely<br />
small and medium-sized business<br />
loans, we are not seeing any<br />
signs of a tightening in lending.<br />
Indeed, at present, the banking<br />
industry is clearly focusing on<br />
the German SME sector, with this<br />
market segment being contested<br />
accordingly. This gives cause for<br />
hope that the repercussions of<br />
the fi nancial market turbulence<br />
for the German economy will not<br />
be so severe.<br />
Stegmann Germany is often<br />
described as being ‘overbanked‘.<br />
At the same time, foreign banks<br />
are increasingly forcing their way<br />
on to the German market. In your<br />
opinion, how will these factors<br />
impact on both retail customers<br />
and the cooperative and savings<br />
banks?<br />
Weber Within the three pillars<br />
of the German banking system,<br />
a considerable amount of consolidation<br />
has taken place amongst<br />
the private banks, public banks<br />
and cooperative banks. Despite<br />
its comparatively rigid structure,<br />
the German banking market is<br />
one of the most competitive bank-<br />
Claus Stegmann<br />
ing markets in Europe. A number<br />
of major international players<br />
have forged a strong position in<br />
Germany within the domain of<br />
retail banking, for example, by<br />
means of Internet banking. This<br />
competition will continue. The<br />
German market also appeals to<br />
foreign banks on account of the<br />
strength of the German economy<br />
and the very strong export performance<br />
of the SME sector.<br />
Stegmann During the past 12<br />
months, in particular, there have<br />
been a number of occasions in<br />
Germany where the Bundesbank,<br />
the Federal Financial Supervisory<br />
Authority (BaFin) and political<br />
protagonists have had to take<br />
very decisive joint action.<br />
Weber The supervisory authorities<br />
have to take action very<br />
quickly in the event of problems<br />
arising concerning the solvency<br />
of an institution, irrespective of<br />
whether the situation involves<br />
a private, public or cooperative<br />
bank.<br />
We still need progression<br />
on the subject of hedge funds<br />
and unregulated market<br />
participants.<br />
Stegmann Nonetheless, a private<br />
bank cannot go to the capital<br />
market in the same way as an institution<br />
that is protected against<br />
risk by the public sector. Potentially,<br />
this also raises the question<br />
of how the EU assesses such risk<br />
protection.<br />
Weber Naturally, in its capacity as<br />
a competition authority, the European<br />
Commission will examine<br />
recapitalisation measures by the<br />
owner in the light of the rules
Prof. Axel A. Weber<br />
on government assistance. I do<br />
not wish to pre-empt this issue.<br />
However, this is not the priority<br />
for the supervisory authorities in<br />
cases where a bank is threatened<br />
by a moratorium. For us, the<br />
systemic stability and systemic<br />
relevance of the institution in<br />
question is of prime importance.<br />
Our fi rst concern is always the<br />
issue of how to ensure an orderly<br />
procedure that does not pose any<br />
risks to the system.<br />
Basel II aims to ensure<br />
consideration of all risk-relevant<br />
factors, including those of capital<br />
adequacy.<br />
Stegmann Returning once again<br />
to Basel II: will there be a refi ne-<br />
ment of the existing methodology<br />
for assessing the risk weights<br />
in lending business?<br />
Weber In comparison with Basel I,<br />
the new Capital Accord remedies<br />
shortcomings, particularly in<br />
the area of securitisation which<br />
became apparent in the light of<br />
the current market turbulence.<br />
Nonetheless, there will be technical<br />
adjustments with regard<br />
to weighting approaches and<br />
conversion factors. The treatment<br />
of certain trading book risks will<br />
also be reviewed.<br />
Stegmann Where do you see<br />
further weaknesses?<br />
Weber We still have to make<br />
headway with regard to hedge<br />
funds and unregulated market<br />
participants. The British hedge<br />
funds have given themselves a<br />
code of conduct which implements<br />
much of what we called for<br />
last year at G7 level. A number of<br />
aspects of the rating process have<br />
to be discussed. For example, the<br />
rating agencies have not only<br />
evaluated the structured products<br />
but, as consultants to the investment<br />
banks, have also played a<br />
part in engineering these products.<br />
This represents a clear confl<br />
ict of interests. There will have<br />
to be an attempt to eliminate<br />
such weaknesses by means of a<br />
separation of functions or by the<br />
introduction of more stringent<br />
regulations on good conduct. In<br />
my opinion, there was a very large<br />
number of longstanding weaknesses<br />
in the international capital<br />
markets. Those weaknesses were<br />
obscured by the exorbitant rates<br />
of growth. During this period,<br />
specifi c proposals failed to gain<br />
political acceptance or were not<br />
even considered by those concerned.<br />
For example, in consultations<br />
with the IASB, the central<br />
banks repeatedly criticised the<br />
procyclicality of some accounting<br />
standards. Moreover, the attempt<br />
under Basel II to address certain<br />
other shortcomings was considered<br />
to be such a far-reaching<br />
encroachment that it led to a<br />
delay in the introduction of<br />
Basel II. It is now clear that an<br />
earlier introduction would have<br />
been the right move.<br />
Stegmann Indeed, one new<br />
insight was the effects caused by<br />
the interplay of credit and liquidity<br />
risks. Last July, there were no<br />
losses that could have triggered<br />
the volatility. Combined with the<br />
liquidity risks, the assumption<br />
alone was suffi cient to set the<br />
ball rolling.<br />
Weber The risk management<br />
system should not blank out<br />
risks occurring off the balance<br />
sheet, and Basel II aims to ensure<br />
consideration of all risk-relevant<br />
factors, including those of capital<br />
adequacy. This is an issue that<br />
we have been discussing for fi ve<br />
years and the new regulations<br />
undoubtedly offer more opportunities<br />
to call for this in specifi c<br />
terms, too.<br />
Stegmann Professor Weber, thank<br />
you very much for this interview.<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 13
“Business Intelligence is becoming omnipresent<br />
in corporate life”<br />
Marco Kiernan<br />
<strong>ifb</strong> group<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 14<br />
Business Intelligence Technology<br />
Services<br />
Project Management<br />
BI Training<br />
Infrastructure<br />
BI Strategy<br />
BI Strategy Implementation<br />
Business Process<br />
Intelligence<br />
Service Oriented<br />
Architecture<br />
BI Software<br />
Reselling<br />
Custom Solutions<br />
Open Source<br />
Callcenter<br />
Ten questions put to Marco Kiernan, head of the new<br />
<strong>ifb</strong> group service line ‘BI Technology‘<br />
What is actually meant by Business Intelligence?<br />
In short, the term Business Intelligence (BI) refers to the procedures and<br />
processes that facilitate systematic collection, analysis and presentation of<br />
company data in electronic form. This provides an insight allowing better<br />
operative or strategic decisions to be effected in line with corporate objectives.<br />
Why has the <strong>ifb</strong> group created an additional service line with<br />
‘BI Technology´?<br />
The area of Business Intelligence is a rapidly growing market segment. In<br />
addition to professional consulting, our clients are increasingly requesting<br />
technical BI solutions and their implementation. Establishing the BI Technology<br />
service line represents a practical expansion of the value-added chain;<br />
we are able to advise our customers on BI issues more comprehensively, and<br />
now also from a technical perspective. To this end, we have a team of highly<br />
experienced specialists who, for the most part, have previously worked<br />
for the relevant software manufacturers or renowned consulting fi rms.<br />
What lies behind this increased demand on the part of the customer?<br />
Today’s corporate decisions demand consideration of an ever-increasing<br />
quantity of information and number of requirements. Fifteen years ago,<br />
having a consolidated view of company data for tactical and strategic decisions<br />
was a unique characteristic; now practically all companies are expanding<br />
their IT systems to include BI Technology. In future, it will be hard to<br />
imagine corporate management without such instruments.<br />
Which corporate areas are of relevance in this respect?<br />
BI is becoming omnipresent. Previously, only selected staff in controlling<br />
and accounting departments employed the corresponding reporting and<br />
analytical tools. In future, these tools will not only be called into play by<br />
authorised decision-makers, but also by operatively active personnel in<br />
sales, marketing and production departments.<br />
Accounting<br />
Sales Force Automation<br />
Range of services provided by the new BI Technology service line<br />
Billing<br />
Services<br />
BI Applications<br />
Frontends<br />
BI Strategy<br />
Data Governance<br />
BI Software<br />
HR/Payroll<br />
Bookings<br />
Operations<br />
Supply Chain<br />
BI Applications<br />
Integrated Planning<br />
Legal Consolidation<br />
Prebuilt Applications<br />
Frontends<br />
Reporting & Analysis<br />
Dashboards<br />
Management Information<br />
BI Portals<br />
Data Governance<br />
Data Warehousing<br />
Data Integration<br />
Data Quality
Why is the interplay between technology and business know-how so<br />
important?<br />
Many BI projects fail for lack of coordination between specifi c requirements<br />
and the implementation of IT. This can lead to false expectations,<br />
user acceptance problems, supplementary costs and budget overruns for<br />
the project. With its business expertise and IT know-how, the <strong>ifb</strong> group can<br />
bring all its strengths to bear on a BI project.<br />
Why is close cooperation or partnership with BI software<br />
manufacturers so important for <strong>ifb</strong>?<br />
A close relationship with software producers is immensely important because<br />
only by cooperating in such a manner are we able to receive prompt<br />
and comprehensive information and support regarding current technological<br />
developments from the manufacturers.<br />
Why does <strong>ifb</strong> maintain cooperation with a number of software<br />
manufacturers?<br />
Many of our customers have heterogeneous IT architectures and use technology<br />
provided by various manufacturers, so we need to take this fact into<br />
consideration. As a fi rst step with respect to BI, we focus on the leading<br />
software manufacturers SAP and Oracle, and to some extent, Microsoft.<br />
How will the new BI Technology service line impact on <strong>ifb</strong>’s existing<br />
partnerships with software manufacturers?<br />
Extremely positively, because the established software manufacturers<br />
recognise the importance and growth potential of Business Intelligence.<br />
As an example, this can be seen in the acquisitions by SAP, IBM and Oracle<br />
of BI software specialist companies such as Outlooksoft, Business Objects,<br />
Cognos or Hyperion. Our new BI Technology service line increases <strong>ifb</strong>’s<br />
appeal as a capable partner for software manufacturers.<br />
For which areas do you offer solutions? Are you focussing on any<br />
specifi c BI themes?<br />
Data warehousing, reporting, analysis, planning and consolidation, together<br />
with all the associated sub-areas. We provide IT solutions and<br />
– in cooperation with other <strong>ifb</strong> Service Lines – also offer total corporate<br />
management solutions. These solutions support the entire management<br />
cycle within the company; namely, from target setting, simulation, modelling,<br />
planning, analysis and reporting right through to preparation of the<br />
annual statement.<br />
How would you describe a typical BI project?<br />
There is no such thing as a typical BI project because each project is unique<br />
in its complexity and scope. For instance, where one customer may require<br />
the migration of several thousand reports, another might call for the<br />
development of a management reporting system that might involve implementation<br />
of an entire business performance management solution. This<br />
would then entail the integration of various sources such as SAP, FibuNet<br />
or Excel, presentation of fi nancial information such as the profi t and loss<br />
account, balance sheet or cash fl ow statement and, of course, presentation<br />
of non-fi nancial key performance indicators (KPI). Moreover, this also<br />
encompasses, for example, external web-based access, monthly planning,<br />
rolling twelve-month forecasts or the mapping of various consolidation periods<br />
to support management or legal reporting.<br />
Marco Kiernan<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 15
Hartmut Görlitz,<br />
Ulrich Steinhauer<br />
LBS Norddeutsche<br />
Landesbausparkasse<br />
Berlin-Hannover<br />
Ralf Beckers<br />
<strong>ifb</strong> group<br />
MDM: master data and metadata management<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 16<br />
Focus Banking<br />
LBS Norddeutsche<br />
Norddeutsc<br />
Norddeutsche<br />
Landesbausparkasse<br />
Total solution for controlling, reporting<br />
and planning<br />
When it comes to performance,<br />
LBS Nord offers its<br />
customers a signifi cant<br />
edge in an extremely competitive<br />
market environment.<br />
In order to increase<br />
this competitive edge,<br />
we decided to implement<br />
an integrated control<br />
solution on the basis of<br />
<strong>ifb</strong>-OKULAR <strong>®</strong> . The result is<br />
impressive in every aspect<br />
– functionally, commercially<br />
and technically.<br />
Hartmut Görlitz<br />
Head of Controlling/Financing,<br />
LBS Norddeutsche<br />
Landesbausparkasse<br />
Berlin-Hannover<br />
Decentralised planning<br />
Analysis<br />
Preparation of information, reporting<br />
• Scorecard<br />
• Planning<br />
• Modelling<br />
Portal (workspace)<br />
• Monitoring<br />
• Analysing<br />
• Reporting<br />
ESSBASE (evaluation cubes)<br />
Calculation engine and cubes<br />
Access layer<br />
(and operative system data storage)<br />
Data integration<br />
Hyperion<br />
Overall bank management with Hyperion and <strong>ifb</strong> group<br />
LBS Nord relies on <strong>ifb</strong>-OKULAR <strong>®</strong> for implementation<br />
of its business intelligence system<br />
“A future-oriented restructuring of the company’s management systems<br />
rather than punctual optimisation of the existing systems”, was the pivotal<br />
decision upon which the Norddeutsche Landesbausparkasse Berlin-Hannover,<br />
LBS Nord, introduced the development of a state-of-the-art integrated<br />
management control system. The fourth largest regional building and loan<br />
association in Germany envisaged a high-performance data warehouse solution<br />
and business intelligence system that created optimised conditions<br />
for controlling, reporting and planning, while simultaneously achieving an<br />
exemplary audit compliancy of all the relevant processes.<br />
Professional selection process with challenging specifi cations<br />
The LBS Nord objective is to ascertain all business data using reliable methods<br />
of a high technical quality and to consolidate such data in a clear and<br />
controlled process. In accordance with specifi c building and loan business<br />
criteria within the scope of the data warehouse solution, this comprehensive<br />
approach required the implementation of high performance components<br />
for calculating market price, fl oating rate and counterparty risks as<br />
well as for client transaction management. In addition, a solution was also<br />
required for the implementation of Basel II.<br />
In light of these program specifi cations, LBS Nord brought in the Würzburg<br />
Business Application Research Centre (BARC) as a specialist partner to<br />
support in selecting an appropriate partner. The subsequent joint analysis<br />
concluded that two providers would be able to implement the required<br />
solution most effi ciently. As a result, LBS Nord opted to commission <strong>ifb</strong><br />
group and Hyperion (now ORACLE) as product suppliers and PROLOGIS as<br />
consultants in relation to the Hyperion environment.<br />
ORACLE<br />
<strong>ifb</strong> group<br />
Parameterisation level for risk and result areas<br />
Management tools, e.g. for treasury/credit treasury<br />
P&L and present value management<br />
Specific evaluations/analyses<br />
Portfolio models<br />
• Sales management<br />
• Market price risk<br />
• Credit risk<br />
ORACLE<br />
internal data external data<br />
• Strategic + OpRisk<br />
• P&L planning<br />
<strong>ifb</strong> group <strong>ifb</strong> group<br />
Basel II reporting<br />
Basel II calculation<br />
engine<br />
Controlling<br />
calculation engine
Professional implementation on the basis of <strong>ifb</strong>-OKULAR <strong>®</strong><br />
While Hyperion implemented the reporting and planning systems linked<br />
to the data warehouse, based on the modular overall bank management<br />
system <strong>ifb</strong>-OKULAR <strong>®</strong> , the <strong>ifb</strong> group was tasked with preparation of the<br />
technical solutions for counterparty risk, LBS Nord securities business management,<br />
sales management – including client transaction planning – and<br />
the man-agement of operational risk and Basel II requirements. The <strong>ifb</strong>-<br />
OKULAR <strong>®</strong> applications will be used directly and exclusively by the controlling/fi<br />
nancing department at LBS Nord.<br />
One challenge needing to be resolved parallel to the implementation activities<br />
already being carried out, is to achieve consistency in terms of all<br />
the ratios and calculation methods employed by LBS Nord. To this end,<br />
supported by the <strong>ifb</strong> group team, LBS specialists will clarify the nature of<br />
data the company generates for a given purpose, the methods applied<br />
and which data will be required in future. Ultimately, future calculation<br />
methods will then be established in a comprehensive glossary with binding<br />
effect.<br />
Optimal conditions for controlling and planning<br />
Drawing on this technical basis, Hyperion furnishes a state-of-the-art,<br />
web-based business intelligence solution for reporting and planning at LBS<br />
Nord. In future, in combination with a precisely developed access rights<br />
concept, Hyperion will provide the relevant management levels with the<br />
possibility of accessing an extensive range of current ratios and reports at<br />
any time via the intranet or internet.<br />
This not only includes the immediate retrieval of clearly presented information<br />
on all the relevant controlling aspects, but also provides a balanced<br />
scorecard from Hyperspace GmbH that allows the implementation of<br />
strategic decisions to be continually monitored. In addition, the intensive<br />
cooperation of LBS Nord with savings banks and independent commercial<br />
agents that is decisive to market success is sustainably improved through<br />
the straightforward availability of current counterparty reports. Moreover,<br />
supported by <strong>ifb</strong>-OKULAR <strong>®</strong> SOLVARIS, the reporting system generates the<br />
relevant LBS Nord reports required by the Deutsche Bundesbank in compliance<br />
with Basel II.<br />
In view of these individual obligations, the LBS Nord planning system, on<br />
whose conception <strong>ifb</strong> group is acting in a consulting role, is the ‘mandatory<br />
element‘ in terms of the BI solution. Supported by the sales units and on<br />
an expandable basis, the complex LBS Nord planning process can be implemented<br />
with an absolute minimum of effort using the required number<br />
of iteration cycles. This procedure not only takes into consideration all the<br />
relevant factors, such as volume of new business, personnel costs and sales<br />
commission, but also embraces qualifi ed risk assessment. In this respect, the<br />
complex collective simulations that savings banks use to forecast development<br />
of their loan and deposit-taking business represent a supplementary<br />
challenge. Specialist service providers are incorporated into the planning<br />
system to provide support with the extremely comprehensive calculation<br />
processes. Bringing the data warehouse and business intelligence solution<br />
successively on stream will position LBS Nord Berlin-Hannover as one of the<br />
leading fi nancial institutes in its sector in terms of IT.<br />
Ralf Beckers<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 17
Dr. Bernd Walter<br />
Kasseler Sparkasse<br />
Swetlana Reykhrudel<br />
<strong>ifb</strong> group<br />
Using the new Liquidity<br />
at Risk method, we have<br />
succeeded in determining<br />
our short-term liquidity on<br />
an objective basis. We are<br />
particularly pleased with<br />
the fact that the project<br />
costs for introducing the<br />
software were amortised<br />
within a short time.<br />
Dieter Mehlich<br />
Managing Director,<br />
Kasseler Sparkasse<br />
Flexible liquidity risk management<br />
Establishing ability to pay<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 18<br />
Focus Banking<br />
Kasseler Sparkasse<br />
Liquidity at Risk:<br />
liquidity risk under control<br />
Optimising the amount and<br />
composition of liquidity reserves<br />
Liquidity change “early warning system”<br />
A MaRisk-compliant liquidity management structure<br />
enables growth in earnings<br />
Net cash outflow<br />
(history + scenarios)<br />
Liquidity reserves<br />
Stress tests: incl. cessation of credit<br />
lines, withdrawal of deposits<br />
Structural liquidity risk management<br />
Maintenance of structural liquidity balance in consideration<br />
of new business planning<br />
Client and principal investments<br />
(current and target)<br />
Liquidity reserves<br />
Funding matrix<br />
Client and principal investments<br />
(current and target)<br />
Inter-bank<br />
refinancing<br />
Optimisation of profitability through<br />
adequate liquidity reserves and “refinancing mix”<br />
Control ratio: Liquidity at Risk Control ratio: Liquidity Value at Risk<br />
Liquidity burden that, in all probability,<br />
will not be exceeded within<br />
a specific period<br />
Volume > Payment flow level<br />
Liquidity risk management requires a fl exible and structural scheme.<br />
The majority of banks manage their short-term liquidity using current ratios.<br />
The new Liquidity at Risk (LaR) concept enables an improved quantifi -<br />
cation of liquidity risk and can provide liquidity management with controlling<br />
impulses that impact on net income. Liquidity management functions<br />
are divided into three elements: short-term liquidity management secures<br />
the bank’s capability to cover net cash outfl ows affecting liquidity that may<br />
occur within days or a few weeks; long-term liquidity management ensures<br />
that the bank’s refi nancing potential remains at an adequate level<br />
during periods of structural change so that it can provide suffi cient funds<br />
at appropriate prices; market liquidity management ultimately ensures<br />
that retained assets can be quickly and effi ciently transformed into liquid<br />
assets. The minimum requirements for risk management (MaRisk) compel<br />
all banks to take liquidity risk suffi ciently into account within their risk management<br />
and control processes.<br />
Liquidity at Risk (LaR) as a solution for meeting MaRisk<br />
requirements<br />
Primarily, MaRisk presents challenges because the anticipated cash infl ows<br />
and outfl ows have to be compared in a liquidity profi le that also encompasses<br />
forecast scenarios. In addition, banks must continuously monitor<br />
whether they are in a position to cover actual liquidity requirements at<br />
any given time. However, conventional current ratios do not permit reliable<br />
statements to be made on the anticipated cash infl ows and outfl ows as<br />
client behaviour constitutes an uncertainty factor that cannot be quantifi<br />
ed using traditional processes. This problem can be solved using the Liquidity<br />
at Risk (LaR) concept: LaR is a calculation of the net cash outfl ow from<br />
all externally directed bank payments that, in all probability, will not be<br />
exceeded during a predetermined time horizon. LaR plots a volume ratio<br />
that is compared with the liquidity reserves, inclusive of credit lines.<br />
Contractual obligations vis-à-vis sales<br />
Underwriting business<br />
Loss of capital due to unexpectedly high refinancing costs that,<br />
in all probability, will not be exceeded<br />
within a specific period.<br />
Volume + price < Capital level<br />
Capital adequacy (MaRisk)<br />
Line capacity, if applicable
Simple and practical implementation using<br />
<strong>ifb</strong>-OKULAR <strong>®</strong> LIQUIRIS<br />
In the form of <strong>ifb</strong>-OKULAR <strong>®</strong> LIQUIRIS, a standard software is now available<br />
for carrying out the complex calculation of LaR. This solution facilitates the<br />
implementation of supervisory law requirements through automatic backtesting<br />
and is certifi ed in such a manner that a bank-internal verifi cation of<br />
the results is not required. The fundamental data consists of payment fl ows<br />
determined by balancing transaction accounts, whereby revenues from<br />
liquidity arrangements are deducted during the calculation of the net cash<br />
outfl ow as they causally serve liquidity management and do not represent<br />
externally directed payments. In practice, calculation of the LaR only requires<br />
one fi le that shows both net cash infl ows and net cash outfl ows with<br />
the commensurate dates. As a basis for the analysis, these fi gures provide<br />
all the available information on client behaviour. A variety of parameters<br />
are now available to the user. Within a specifi c time band, the LaR can be<br />
determined for any combination of the prescribed terms and confi dence<br />
levels. Terms ranging from a few days to one month are available for the<br />
appropriate maturity structures.<br />
Options relating to performance-based liquidity<br />
management<br />
Conscious of its short-term liquidity requirement, a bank can avoid excessive<br />
levels of highly liquid assets and their resultant negative impact on income.<br />
If such assets are refi nanced through borrowing on the liabilities side, the<br />
corresponding extra charges are frequently higher than those for securities<br />
(mortgage bonds, federal) held for the purpose of liquidity management.<br />
The effect on income resulting from the reduction of excess liquidity reserves<br />
and repayment of refi nancing funds constitutes a reduction of the<br />
bank’s negative spread between refi nancing and investment. Calculation<br />
of the LaR also offers benefi ts where a reduction of refi nancing funds is not<br />
possible on account of refi nancing being intensively client-based or where<br />
this is undesirable from an accounting policy perspective. Funds that are<br />
not immediately required to create liquidity can be redistributed to other<br />
securities with lower degrees of liquidity and higher liquidity premiums.<br />
As a rule, in the case of both stated procedures for optimising earnings<br />
through redistribution to the bank’s own security deposit account, a period<br />
of two days must be allowed for liquidity to become available. Awareness<br />
of the LaR also allows the optimisation of funding credit lines that must<br />
be available in less than a day. Secured credit lines at other banks or the<br />
pledged account at the Central Bank can be suitably reduced and matured<br />
securities redistributed in order to benefi t net income. Practical experience<br />
shows that using the LaR concept, a short-term reduction of liquidity costs<br />
is achievable that, in turn, has a direct impact on the P&L account.<br />
Swetlana Reykhrudel<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 19
<strong>ifb</strong> <strong>Annual</strong> 07/08 20<br />
Focus Banking<br />
Integrated counterparty risk measurement<br />
on the basis of a hybrid model<br />
Thomas Rempel-Oberem<br />
<strong>ifb</strong> group<br />
Example of a medium-sized German bank illustrates<br />
a new way of quantifying counterparty risk<br />
Credit Value at Risk has become increasingly signifi cant in terms of bank<br />
controlling, in turn raising the question of how this process can be integrated<br />
into a comprehensive controlling system. The subsequent essential<br />
factors are comprehensive risk assessment, consistent methodology and an<br />
integrated view. This means that the diversifi cation effects at an overall<br />
bank level need to be appropriately considered as opposed to the individual<br />
Values at Risk of various portfolios. This is also necessary for calculating<br />
the risk-bearing capability.<br />
In response to these requirements, <strong>ifb</strong> has developed the following hybrid<br />
model in cooperation with a medium-sized German bank. Firstly, the relevant<br />
counterparty risk portfolios were identifi ed and linked to various<br />
appropriate risk models. Next, the results at an overall bank level were<br />
aggregated, whereby diversifi cation effects were also taken into consideration.<br />
The thus determined Credit Value at Risk was then divided into<br />
individual positions as a basis for managing the credit risks. The aim of the<br />
project was to comprehensively measure the Credit Value at Risk of all the<br />
bank‘s credit portfolios, whereby the specifi cs of the corresponding risk<br />
models and also their inter-diversifi cation were appropriately taken into<br />
account.<br />
Identifying the portfolios<br />
The basis of the hybrid model is formed by the division of the entire portfolio<br />
into a number of sub-portfolios that are uniform in both context and<br />
structure. In the project described here, three groups were identifi ed:<br />
1. A retail portfolio comprising several hundred thousand counterparties,<br />
whose exposure distribution and rating structure was both homogeneous<br />
and well diversifi ed.<br />
Retail<br />
Private clients and SME<br />
clients, extremely small-scale<br />
business with good<br />
diversification<br />
Credit Risk+<br />
Large-scale financing<br />
Extremely large exposures<br />
in part, potential for<br />
significant swings<br />
in security values<br />
Monte Carlo<br />
simulation model<br />
Copula method<br />
Consolidation of Credit Value at Risk at overall bank level<br />
Principal investments<br />
Minimum default risk,<br />
but potential substantial<br />
risk as a result of<br />
drops in rating<br />
Credit Metrics<br />
Calculation of risk shares<br />
Division of Credit Value at Risk between individual counterparties<br />
Using the three portfolios ‘Retail‘, ‘Large-scale fi nancing‘ and ‘Principal investments‘, the hybrid model facilitates the integrated calculation<br />
of Credit Value at Risk.<br />
Model level
2.<br />
A portfolio of large-scale fi nancing schemes with a few thousand com-<br />
mitments. These formed a self-contained group on account of their<br />
large volumes and the substantial signifi cance of potential swings in<br />
security values.<br />
3. Principal investments subject to counterparty risk, where the focus was<br />
not so much on default risk, but rather on the risk of loss due to changes<br />
in credit standing.<br />
Allocation of risk models<br />
These three portfolios were subsequently linked to various risk models that<br />
were best-suited for evaluating the respective activities:<br />
1. The well-known Credit Risk+ model, which can reliably assess a large<br />
number of counterparties at an excellent rate of performance, was selected<br />
for the retail portfolio for reasons of effi ciency.<br />
2. A Monte Carlo simulation model, which also takes into account swings<br />
in security values and enables fl exible assessment, was best-suited to the<br />
large-scale fi nancing schemes.<br />
3.<br />
The Credit Metrics model, which in addition to default risk also takes<br />
potential loss resulting from rating drops appropriately into account,<br />
was used for the principal investments.<br />
This provided the basis for calculation of a realistic distribution of losses for<br />
all the models. These in turn form the basis for the subsequently implemented<br />
Copula method, which, in the next step, integrated and consolidated<br />
the counterparty risk on an overall bank level.<br />
Aggregation using the Copula method and calculation of<br />
risk shares<br />
In addition to the diversifi cation effects, the aggregation of risk should<br />
also refl ect the specifi c asymmetry of counterparty risk distribution. As<br />
such, the so-called Copula method is better suited here than a ‘simple‘<br />
variance-covariance approach. In an analytical procedure, the probability<br />
of all the potential events occurring simultaneously is evaluated, including<br />
the correlation effects. The result is a uniform loss distribution that specifi<br />
es the bank’s overall counterparty risk. Through this integrated structure,<br />
the Credit Value at Risk of the entire bank can ultimately be divided<br />
amongst the individual counterparties. This enables sustainable credit risk<br />
management from the individual transaction level right up to the structural<br />
allocation at overall bank portfolio level.<br />
The integrated measurement of counterparty risk using the above depicted<br />
hybrid model enables the specifi cs of individual portfolios to be taken into<br />
account without neglecting integration on an overall bank level and the<br />
results of individual counterparties. Counterparty risk management is<br />
hence more transparent, more fl exible and open to any future expansion.<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 21
The challenges of a transactional banking<br />
project – akin to replacing an aircraft<br />
engine in mid-fl ight<br />
Jürgen Mauk<br />
<strong>ifb</strong> group<br />
Nationwide’s Business<br />
Transformation Programme<br />
‘Voyager’ is a major strategic<br />
investment for the<br />
Society and its members.<br />
The size and complexity<br />
may appear akin to replacing<br />
the engines on a<br />
Boeing 747 whilst in fl ight<br />
but we recognise this as an<br />
exercise in effective risk management.<br />
We understand<br />
this as clearly as we do the<br />
upside benefi ts, which for<br />
us, are very signifi cant.<br />
Darin Brumby<br />
Divisional Director Business<br />
Systems Transformation,<br />
Nationwide Building Society<br />
Training<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 22<br />
Build<br />
Architecture/<br />
Infrastructure<br />
Focus Banking<br />
Process-<br />
Analysis<br />
As-Is System<br />
Landscape<br />
Business<br />
Process<br />
Reengineering<br />
Vanilla<br />
(target)<br />
Successful <strong>ifb</strong> projects with international banks<br />
illustrate how sensitive changes in transactional<br />
banking can be implemented with calculable risk<br />
Currently, one of the most important tasks facing banks is the optimisation<br />
of transactional banking – also referred to as ‘core banking‘ – which<br />
involves consolidating the administration of current accounts, savings<br />
accounts, time deposits and loans. A perfect data fl ow within this bulk banking<br />
business reduces costs and complexity, thereby increasing margins and<br />
effi ciency.<br />
Transactional banking projects place high demands on the implementation<br />
partners: even the slightest processing or adjustment error can cause grave<br />
damage, including erroneous account balances and transfers or incorrect<br />
data for risk assessment. In addition, these projects do not merely involve a<br />
single reporting unit or sub-system, but rather concern the bank’s ‘engine’,<br />
in other words its entire IT infrastructure and production, all the accounts,<br />
deposits, transfers, loans, client data etc. Given that downtime of just<br />
one single working day would have catastrophic consequences and that<br />
a three-day disruption could even mean the end of the bank, this engine<br />
must continue to function throughout the entire implementation project.<br />
Consequently, as is the case in aircraft construction, a transactional banking<br />
project requires comprehensive planning and numerous highly specialized<br />
partners.<br />
Affording business requirements priority<br />
In cooperation with SAP <strong>AG</strong> and banks from various countries, <strong>ifb</strong> group<br />
has successfully implemented numerous transactional banking projects.<br />
Such projects initially always encompass both operational and technical<br />
requirements, whereby the IT architecture is fundamentally aligned to the<br />
business requirements. The overall project is therefore essentially driven<br />
by the business aspect as apposed to being an IT project. As such, the following<br />
procedure is recommended:<br />
Training<br />
Prototype Sandbox BBP Realisation Test Simulation Production<br />
Vanilla<br />
(adjusted)<br />
Preliminary<br />
Target<br />
Architecture<br />
Migration Planning Migration Realisation Migration Production<br />
Change Management<br />
Target<br />
Architecture<br />
A transactional banking project requires specifi c comprehensive planning, given that all the operational systems in the bank are changed, adapted and/or<br />
replaced without interrupting ‘production‘ at the bank.
1. Prior to starting the actual project, stock is taken of all the processes,<br />
their consolidation and thematic allocation.<br />
2. During subsequent Business Process Reengineering (BPR), it is important<br />
that these processes are either optimized or, where necessary, redesigned.<br />
SAP process and systems experts should already be participating<br />
at the BPR stage in preparation for the future employment of standard<br />
software. Any questions, requirements and reservations should be clarifi<br />
ed with the specialist departments beforehand.<br />
3. These steps form the basis of the business blueprint, which maps the<br />
business requirements within the IT structure. Next, the fi rst client employees<br />
attend SAP seminars to develop their expertise. A technical platform<br />
is installed as a prototype in advance to replicate the requirements<br />
established during BPR. Functional gaps in the standard software can<br />
now be jointly identifi ed. Planning of the implementation phase then<br />
commences and the initial overall assessment of deposit management<br />
costs confi rmed.<br />
4. Ideally, the comprehensive implementation phase is divided into individual<br />
steps, or releases. This division is dependent on a number of<br />
factors and is only defi nable following BPR. The fi rst release should be<br />
as modest as possible and only encompass, for example, newly opened<br />
accounts, and not the complete transfer of more established accountrelated<br />
data and data stocks. Risk at the productive start of such a minirelease<br />
can be further reduced if, to begin with, accounts are opened<br />
and transactions are carried out solely by bank employees as apposed to<br />
customers. Above all, this high security approach must always be adapted<br />
to real conditions.<br />
In the following steps, data fi les are migrated according to specifi c products<br />
and the old system is successively shut down; for example, fi rst current<br />
accounts, then savings accounts, time deposits and loans.<br />
Redesigning IT architecture<br />
The task of IT is to structure its architecture in consideration of all applicable<br />
business requirements and SAP standards; whereby optimisation and<br />
categorisation of processes is also a prerequisite. An example of such is<br />
the optimisation and categorisation of payment transaction processes.<br />
Ideally, these will be consolidated into a payment layer (payment transaction<br />
system, dispatcher, transaction broker), which does not only implement<br />
technical payment transaction process allocation, but also guarantees<br />
its completeness, unambiguity and auditability. This would not be possible<br />
without consolidated processes and the corresponding target architecture.<br />
An essential prerequisite to achieving this is that the entire architecture is<br />
service-oriented.<br />
Overview of further important implementation steps<br />
In addition, numerous other tasks need to be considered: for example<br />
the establishment of a programme management offi ce that can manage<br />
between 50 and 250 people. A central element also involves data acquisition<br />
from the legacy systems, mapping or accumulation, time-critical upload<br />
at the productive start and coordination of the migrated data. Owing to<br />
the size and complexity of these projects, change management as well as<br />
tests and resource planning are also of major importance for successful<br />
implementation.<br />
Marek Ristock<br />
Enterprise SOA is nothing<br />
more than services packed<br />
in standardised interfaces<br />
that all speak the same<br />
language (semantics). The<br />
signifi cance of this approach<br />
becomes clear using<br />
an analogy from air traffi c<br />
management: instead of<br />
having interpreters at every<br />
airport translating between<br />
the languages of the air<br />
traffi c controllers and the<br />
individual pilots, the agreed<br />
worldwide standard is for<br />
all pilots and air traffi c controllers<br />
to use English as the<br />
single authorised language.<br />
This standardisation guarantees<br />
fl exible air traffi c<br />
management and a reduced<br />
level of risk.<br />
Martin Schroter<br />
Chief Architect SAP Financial<br />
Services, SAP <strong>AG</strong><br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 23
Communication and documentation<br />
requirements necessitate a change in paradigm<br />
Dr. Rainer Merkt,<br />
Marek Ristock<br />
<strong>ifb</strong> group<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 24<br />
Focus Banking<br />
<strong>ifb</strong> supports inter-departmental and inter-system<br />
communication and documentation<br />
with PathWeaver <strong>®</strong><br />
Market sectors Backoffice Principle departments<br />
Loans Middleware<br />
Book value<br />
Share secured<br />
by mortgage in %<br />
Secured by business<br />
mortgage<br />
Leasing<br />
Book value<br />
Share secured<br />
by mortgage in %<br />
Secured by business<br />
mortgage<br />
Market sectors IT<br />
Fast and effi cient communication within and between various departments<br />
is a principal factor of success for banks and insurance companies.<br />
Documentation forms a central part of this process: it coherently explains<br />
complex content, records agreements, is distributable to numerous recipients<br />
and also spans time.<br />
Specifi c documentation with its own focus and language is generated in<br />
each department and for every IT system, a factor that hampers communication<br />
between departments and outside system boundaries. Such insuffi -<br />
ciency in internal communication conceals risks and generates high costs.<br />
Moreover, the signifi cance of communication and documentation, in particular<br />
for banks and insurance companies, is increased still further through<br />
external factors, not least by compliance requirements such as Basel II/<br />
Pillar 2, MaRisk, MiFID and SOX. Processes and data fl ows need to be transparent<br />
for auditing, auditors and supervisory bodies<br />
A silo mentality and individual documentation complicate<br />
communication<br />
The generation and maintenance of good quality documentation is often<br />
neglected, which results in justifi ed doubt with respect to their completeness,<br />
consistency and currency. In addition, a reduction in the quality<br />
and appropriateness of documentation also reduces the level of utilization.<br />
Market-based, specialist and IT departments often fail to understand each<br />
other because they do not share uniform and transparent language and documentation.<br />
In particular, the meaning (semantics) of specialist terms and<br />
data items is frequently unclear and not centrally defi ned. Managers call up<br />
data items for a variety of reasons, then defi ne, process, communicate and<br />
report on them; often resulting in inconsistencies and discrepancies.<br />
A further problem is the lack of transparency in terms of results. Data is<br />
Book value<br />
Share secured<br />
by mortgage in %<br />
Secured by business<br />
mortgage<br />
Middleware IT<br />
Analysis<br />
Data flow<br />
IFRS Analyzer Management reporting<br />
Book value<br />
…<br />
Share secured<br />
Share of book value<br />
by mortgage in %<br />
secured by mortgage<br />
Secured by business<br />
mortgage<br />
‘Backward analysis‘ in PathWeaver <strong>®</strong> elucidates which processes, systems and data infl uence specifi c result windows<br />
(here, for example, the result window ‘Share of book value secured by mortgage‘).<br />
Regulatory reporting<br />
Share of book value<br />
secured by mortgage<br />
Backoffice IT Principle departments IT
uploaded in a variety of reporting applications from numerous front-offi<br />
ce systems via different back-offi ce systems. As a result of the numerous<br />
individual documents, it is then no longer evident and transparent how<br />
specifi c results were determined and which processes, systems and data<br />
were infl uential in achieving them.<br />
Inter-departmental and inter-system documentation<br />
Based on more than 15 years of project experience at the interface between<br />
market-based, specialist and IT departments, <strong>ifb</strong> group has developed an<br />
inter-departmental and inter-system documentation and communication<br />
concept. The concept focuses on the central, uniform and comprehensive<br />
documentation of:<br />
data models (data items/structures) and their semantics,<br />
transformation, e.g. the transfer/processing of data items,<br />
process phases of business and IT processes.<br />
PathWeaver <strong>®</strong> software also supports the concept technically, which enables<br />
both an overall and detailed mapping of data models and process phases.<br />
As the illustrated mapping example shows, data fl ows are transparent from<br />
end-to-end. The benefi ts of inter-departmental and inter-system documentation<br />
are clearly evident: the uniform mapping of systems, data items, interfaces<br />
and processes is just as clear-cut and consistent as it is transparent<br />
and complete. The centralised documentation is accessible to all concerned<br />
and promotes communication between market-based, specialist and<br />
IT departments, while fl exible granularity in terms of presentation allows<br />
for adaptation for the purposes of evaluation. Moreover, inter-departmental<br />
utilisation of the mutual documentation platform, PathWeaver <strong>®</strong> , enables<br />
the semantic integration of business and technical ratios and fi gures.<br />
PathWeaver <strong>®</strong> also provides support with respect to system introduction,<br />
expansion and migration.<br />
Where the path is leading – a change of paradigm for<br />
IT architecture and structural organisation<br />
The concept not only supports changes in communication and documentation<br />
behaviour, but also the necessary rethinking in terms of IT architecture<br />
and structural organisation. Method consistency, integration and<br />
transparency are the key words characterising the current discussions on IT<br />
architecture. PathWeaver <strong>®</strong> anticipates the change in paradigm as regards<br />
service-oriented architecture (SOA), the principles of which are also becoming<br />
increasingly established in the IT architecture of banks and insurance<br />
companies. Additionally, a change in paradigm as regards structural<br />
organisation is also apparent. Transparency and methodical and semantic<br />
integration can only be signifi cantly improved if structures change. In place<br />
of the silo mentality, control mechanisms are required that implement new<br />
methods of communication and documentation on an inter-departmental<br />
and inter-system basis.<br />
Effi ciently meeting the multifaceted compliance and governance requirements<br />
is one of the greatest challenges currently facing the fi nancial sector.<br />
Accordingly, <strong>ifb</strong> group provides support both in the form of its interdepartmental<br />
and inter-system documentation and communication concept<br />
and with its PathWeaver <strong>®</strong> software.<br />
Dr. Rainer Merkt<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 25
Dr. Adrian Ainetschian,<br />
Tobias Richert<br />
<strong>ifb</strong> group<br />
On the theory and practical<br />
application of stress tests<br />
in banks, see also the following<br />
book published by<br />
the <strong>ifb</strong> group:<br />
Claus Stegmann,<br />
Kai-Oliver Klauck (Hrsg.):<br />
Stresstests in Banken.<br />
Von Basel II bis ICAAP,<br />
Schäffer-Poeschel,<br />
Stuttgart 2006.<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 26<br />
Focus Banking<br />
Subprime crisis as a case in point: how stress<br />
tests create liquidity risk transparency<br />
10. Crisis of confidence on the markets<br />
and between banks<br />
9. Drop in new business and tightening<br />
of liquidity<br />
8. Run on banks,<br />
creditor banks encounter problems<br />
7. Increasing liquidity requirement,<br />
tougher refinancing conditions<br />
For extreme crisis cases, statistical models should be<br />
supplemented by stress tests<br />
Using the subprime crisis as an example shows that liquidity risk management<br />
needs further development. In order to be suffi ciently armed for corresponding<br />
developments on the fi nancial markets, stress tests must be<br />
introduced to supplement statistical models such as Liquidity at Risk. This<br />
would facilitate early simulation and forecasting of the extreme crisis situations<br />
that could well lead to the insolvency of a bank.<br />
Statistical models in a normal situation<br />
Liquidity management is based on the gap analysis (funding matrix), which<br />
involves the comparison of cash infl ows and outfl ows in time bands. In Germany,<br />
subject to specifi c requirements, MaRisk and the new Liquidity Regulation<br />
(Liquiditätsverordnung) allow banks to measure and report liquidity<br />
risk using their own procedure instead of standard methods. Depending<br />
on the business model and situation of the bank, this procedure may vary<br />
greatly. As such, there are no standard guidelines that bind all banks. In<br />
normal situations, the new statistical models such as Liquidity at Risk are<br />
important supportive procedures.<br />
Stress tests for a crisis situation<br />
However, in crisis situations statistical models should be supplemented by<br />
the appropriate stress tests similar to the market price risk environment.<br />
The Committee of European Banking Supervisors (CEBS) has consequently<br />
put forward a number of basic scenarios. These include the following market-induced<br />
scenarios: problems in the inter-bank market, withdrawal of a<br />
key market participant from a specifi c market, the shortage of liquid funds<br />
in a specifi c market and the collapse of a signifi cant currency. In addition<br />
the following bank-related scenarios were suggested: a drop in the bank‘s<br />
credit rating and subsequent rise in refi nancing costs, a higher level of commitments,<br />
an increased outfl ow of deposits and diminishing credit lines.<br />
1. Interest rate increase (2004–2006)<br />
2. Interest burdens in terms of real estate credit<br />
3. Bursting of real estate bubble, forced sales<br />
4. Increased drawing of credit derivatives<br />
5. Flight to government bonds, diminishing yields<br />
6. Write downs, illiquidity of asset-backed securities<br />
The subprime crisis and its various stages: stress tests afford transparency at an earlier stage in relation to crises and any subsequent consequences<br />
affecting liquidity.
A combination or sequence of these or similar scenarios could develop into<br />
a crisis that, in turn, could lead to a liquidity risk.<br />
In terms of overall bank management, an attempt should be made to defi ne<br />
these basic scenarios with identical parameters used for other stress tests,<br />
for example, those employed for market price risk.<br />
Examples from the subprime crisis<br />
Using the individual stages of the subprime crisis as an example, the following<br />
shows how various prime risk stress tests could be used to map such<br />
a scenario (for the different stages, see also the illustration).<br />
Between 2004 and 2006, the Federal Reserve (USA) increased the interest<br />
rate no less than 17 times. Primarily, such a move leads to short-term outfl<br />
ows on the liabilities side; the resulting market price risk can be simulated<br />
using interest rate shifts or spreads. However, the interest rate hikes<br />
also led to an increased propensity for counterparty default as the burden<br />
on real estate credit based on variable interest – widely used in the<br />
USA – increased perceptibly. The appropriate stress tests show, with a specifi<br />
c time displacement, the probability of key borrower default or cluster<br />
risks within the portfolio. Consequences within the funding matrix are delays<br />
or defaults in payment, with further losses also incurred through price<br />
losses in relation to securities – for example, collateralised debt obligations<br />
(CDOs), with which credit risks relating to mortgage-based loans are securitised<br />
on the capital market – or generally through the illiquidity of fi nancial<br />
instruments and markets. These can be simulated using additional stress<br />
tests (market price risk, exchange risk).<br />
Market participants reinvested in secure government bonds, which in turn<br />
caused a loss of effective yield. As a result of the markets for CDOs and ABS<br />
drying up, the subprime crisis intensifi ed, with a drastic reduction in new<br />
business and inter-bank credit lines. For fi nancial institutes specialising in<br />
subprime loans, the impact has been massive: liquidity reserves have fallen<br />
and refi nancing has only proved possible subject to tough conditions. This<br />
in turn damaged the reputation of the relevant banks, resulting in a reduction<br />
of its credit rating or withdrawal of credit lines. It is for this reason that<br />
also intrinsic risks caused by external events or operational risks, such as<br />
loss of reputation, have to be taken into consideration in stress tests.<br />
Conclusion<br />
Through appropriate modelling of the primary risk drivers, stress tests enable<br />
liquidity risk to be mapped and managed. This integrative approach<br />
to the diverse basic risks is still in the development phase in many banks. In<br />
future, supervisory law will increasingly focus on more advanced processes<br />
for measuring liquidity risk and the corresponding stress tests. Banks with<br />
fl exible and open IT architectures that enable integrative and transparent<br />
views of source and result data using various solutions will have the edge.<br />
Dr. Adrian Ainetschian<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 27
European Bank for Reconstruction and<br />
Development optimises limit systems<br />
Olaf Weick<br />
<strong>ifb</strong> group<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 28<br />
Focus Banking<br />
Source Systems<br />
SAP Portal<br />
The <strong>ifb</strong> group has provided specialised and technical<br />
assistance to the EBRD for a number of projects,<br />
including introduction of the SAP Limit Manager<br />
The European Bank for Reconstruction and Development (EBRD) was established<br />
in London in 1991 to support Central and Eastern Europe during<br />
the transition to a market economy and to promote entrepreneurial enterprise.<br />
Today, the EBRD is the biggest individual investor in the countries of<br />
the former eastern block. More than 60 states and organisations are shareholders<br />
in the bank, including the European Union and its member states,<br />
as well as the USA and Japan. This distinctive structure as a supranational<br />
organisation with investments in capital markets that in some cases are<br />
only partially established requires a particularly high level of transparency<br />
in terms of risk.<br />
Since 2006, the <strong>ifb</strong> group has been supporting the EBRD in achieving<br />
this task in its capacity both as a specialist and technical partner for the<br />
following projects:<br />
Introduction of a hedge accounting solution using SAP Accounting for<br />
Financial Instruments software (AFI), which replaced the previous system<br />
developed by the bank.<br />
Establishment of a joint data pool based on the SAP-BI for applications<br />
in the area of risk management and accounting.<br />
Introduction of an SAP Limit Manager system to monitor credit limits.<br />
As an example, details of implementation and the benefi ts of the new limit<br />
system are provided in the following. Introduction of the system forms part<br />
of a comprehensive internal EBRD programme to improve risk management<br />
processes, methods and systems. The limit system pertaining to credit and<br />
commercial risks is not only a requirement of supervisory law, but is also an<br />
important instrument of internal capital and risk management. It monitors<br />
a multitude of limits for various risk positions maintained by the bank, such<br />
as national country limits, business partner limits or portfolio limits. This<br />
ensures that existing risks are transparent, limits are adhered to and imme-<br />
Analytic Layer<br />
Result Data Layer<br />
Method Layer<br />
Financial Data Base<br />
EUR<br />
Limit<br />
Availment of credit<br />
The limit system serves to ensure that all existing risks are transparent and remain within the limit structure, and that immediate counter measures can be<br />
implemented should limits be exceeded.<br />
TIME
diate countermeasures can be initiated should the limits be exceeded. As<br />
such, the aim of the project is to effect central monitoring of all credit risks<br />
undertaken by the bank.<br />
The project began with a detailed analysis and documentation of the<br />
EBRD‘s operative requirements in terms of monitoring its credit limits. This<br />
analysis was then used to prepare an IT implementation concept.<br />
The task of the <strong>ifb</strong> group included responsibility for the specialist technical<br />
concept of the SAP Limit Manager, which is part of the SAP sector solution<br />
‘SAP for Banking‘ , and subsequent technical implementation. To satisfactorily<br />
meet all the specifi c requirements of the EBRD, a standard SAP<br />
solution is being commensurately expanded, for example, by introducing<br />
the possibility of dividing and presenting the credit risk in terms of time<br />
bands. In addition, <strong>ifb</strong> is also developing a new user interface for the SAP<br />
Limit Manager that is optimally tailored to the needs of the bank. The expansions<br />
are provided as services, in turn enabling fl exible application, and<br />
are incorporated in the service-orientated architecture (SOA) of the SAP<br />
Bank Analyzer.<br />
User-friendly interface simplifi es monitoring of limits<br />
The new interface provides users with an overview of all limits together<br />
with information that is of specifi c relevance to them, for example, rating<br />
information pertaining to borrower limits. It facilitates user-friendly processes<br />
and is also incorporated in the SAP Enterprise Portal, which simplifi<br />
es the combination of various applications. The bank employee simply requires<br />
an Internet browser, no other software needs to be installed on the<br />
PC. Users access the SAP Enterprise Portal via their Internet browser; thereby<br />
not only gaining access to the SAP Limit Manager, but also to additional<br />
comprehensive information on business partners, access to the bank-internal<br />
document administration system, as well as the workfl ow and reporting<br />
tool. As such, the user responsible for controlling the borrower limit is<br />
simultaneously provided with details of the borrower and documentation<br />
pertaining to the credit approval process.<br />
The new interface: quick to implement, state-of-the-art<br />
application<br />
Technically speaking, the new display is based on Web Dynpro for ABAP,<br />
the new SAP standard for user interfaces. The advantages of the new standard<br />
over the classical SAP interface are reduced potential for defects with<br />
respect to new developments, a short development period, lower development<br />
costs, an up-to-date, modern layout and seamless integration into<br />
the SAP portal – the overall principle being: maximum design, with the<br />
minimum of programming. The interface is based on central services that<br />
facilitate data preparation. This service-orientated architecture enables<br />
functions to be uncoupled from the display on the screen.<br />
Operational implementation of the SAP Limit Manager – planned for the<br />
end of the year – will provide the EBRD with a credit default risk limit system<br />
that meets the latest professional, supervisory and technical standards<br />
and which simultaneously affords consideration of the bank’s own specifi c<br />
needs.<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 29
Governance, risk and compliance in banks:<br />
transparency in risk management –<br />
Pillar 2 as a GRC initiative<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 30<br />
Focus Banking<br />
Ralf Huff,<br />
Dr. Kai-Oliver Klauck<br />
<strong>ifb</strong> group<br />
The market players are<br />
called upon to assume<br />
responsibility for improving<br />
risk management. In particular,<br />
this concerns liquidity<br />
risks, measurement practice,<br />
disclosure requirements and<br />
transparency.<br />
Prof. Axel A. Weber<br />
President of the Deutsche<br />
Bundesbank<br />
Banks are able to use implementation of Pillar 2,<br />
Basel II, to improve transparency of their internal<br />
control and management procedures<br />
In the face of the current fi nancial market crisis, two particular questions<br />
come to the fore: namely, how can the supervisory body expedite stabilisation<br />
of the fi nancial markets following introduction of Basel II? And<br />
what independent action can individual banks take to protect themselves<br />
against the potentially catastrophic consequences of such a crisis? These<br />
questions also form the subject of recommendations put forward by the<br />
Financial Stability Forum (cf. interview with Prof. Axel A. Weber, President of the<br />
Deutsche Bundesbank, p.10).<br />
In this respect, the interests of supervisory authorities and the individual<br />
banks are actually closer than may well appear at fi rst glance. It is less<br />
a question of tightening specifi c regulatory requirements – for one only<br />
needs to look at the current crisis to see that the supervisory provisions<br />
are lagging behind the fi nancial markets. Rather, it pays to take a closer<br />
look at the existing requirements of Pillar 2; given that implementation<br />
of these provisions improves transparency in risk management and capital<br />
allocation, not only for the supervisory authorities, but also on an internal<br />
basis for the banks themselves. Naturally, this does not guarantee strategically<br />
correct management decisions; however, it does considerably reduce<br />
the likelihood of undesirable developments. As such, implementation of<br />
Pillar 2 is not a ‘necessary evil‘, rather it represents an opportunity. Thus,<br />
the opportunity is not merely a question of using the framework prescribed<br />
by Pillar 2 to achieve transparency vis-à-vis supervisory authorities<br />
in terms of risk management and capital allocation, but is also about specifi -<br />
cally using Pillar 2 internally within the bank to improve management and<br />
create a culture of risk awareness. Overall, this is implemented by means of<br />
governance, risk and compliance (GRC).<br />
Risk<br />
Strategies<br />
Risk management and<br />
controlling processes<br />
Governance<br />
Overall responsibility<br />
of the management<br />
Operational and<br />
organisational structure<br />
Internal auditing<br />
Risk-bearing capability Documentation<br />
Process requirements for credit<br />
and commercial business<br />
Internal control system<br />
Compliance<br />
A comprehensive GRC initiative not only enables banks to meet the requirements of Pillar 2, but, above all, also allows them to use the requirements internally<br />
to improve management and create a culture of risk awareness.
Compliance and corporate management must go hand in<br />
hand<br />
To date, compliance has frequently been limited to ensuring observance<br />
of the requirements of supervisory law, such as sending commensurate reports<br />
to the appropriate authorities. The information required to achieve<br />
this often stems from technical island solutions – seldom is it the result<br />
of a comprehensive overview created, for example, within a management<br />
information system. This gives rise to data redundancy and unnecessarily<br />
high expense due to the fact that management, internal auditing or the<br />
supervisory authority are, in part, presented with similar information. In<br />
addition, certain aspects of risk management and compliance are inadequately<br />
incorporated within the structure and process organisation of<br />
many banks. The outcome: in a number of banks the management and supervisory<br />
board have an insuffi cient overview of the existing risk situation.<br />
Whereas risk management and compliance may be somewhat secondary<br />
aspects for other companies, in the case of banks, these areas form a central<br />
element of the business activity and as a result should be appropriately<br />
incorporated into corporate management (governance).<br />
Achieving this fi rst requires ‘compliance‘ to be expanded so that it goes<br />
beyond simply referring to reporting. Such expansion entails the introduction<br />
of a corresponding framework as well as structural and procedural<br />
organisation within the bank. Moreover, activities need to be incorporated<br />
into bank management processes to a far greater extent than has<br />
previously been the case. Overall, the aim is to bring risk management and<br />
compliance in line with corporate objectives and present the management<br />
with the information necessary to accomplish this. Only by achieving such<br />
a position is it possible to establish the risk-bearing capability, determine a<br />
risk strategy and ensure adequate provision for risks and risk situations.<br />
Risk management as a central element<br />
Any comprehensive risk management system within the meaning of a GRC<br />
initiative will not only include credit, market and operational risks, but<br />
will also extend to an internal system of control. In addition, risks that are<br />
somewhat diffi cult to quantify such as the risk to reputation, strategic risks,<br />
or risks not backed by equity, such as liquidity risks, can also be afforded<br />
consideration. A GRC initiative will also include commensurate documentation,<br />
communication and incorporation into training and personnel development.<br />
Not least, it will also require well-grounded and comprehensive<br />
IT support.<br />
The benefi ts of such a GRC initiative considerably outstrip the associated<br />
costs. Firstly, costs are reduced through the avoidance of data redundancy;<br />
secondly, the costs of implementing Basel II (Pillar 2) are minimised as<br />
a result of pre-empting the requirements prescribed by the supervisory<br />
authority; and thirdly, the process gives rise to an expectation that fi nancial<br />
markets will reward a risk-conscious approach and effective controlling.<br />
Indeed, this expectation has encouraged a series of banks to select an<br />
advanced approach in terms of calculating equity capital needs.<br />
However, of much greater importance than cost considerations is the opportunity<br />
to considerably enhance assessment of the bank‘s risk position<br />
and, consequently, safeguard its sustainable development. This is not only<br />
in the interests of the management, supervisory board and investors, but<br />
also serves the interests of the fi nancial supervisory authorities.<br />
Ralf Huff<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 31
Börge Thiel<br />
AR<strong>AG</strong> Rechtsschutz<br />
Lars Tybussek<br />
<strong>ifb</strong> group<br />
Through the implementation<br />
of ProKoRisk <strong>®</strong> we<br />
have substantially accelerated<br />
our operational risk<br />
management processes. <strong>ifb</strong><br />
group has proved itself a<br />
highly competent professional<br />
and technical partner<br />
throughout the implementation<br />
phase.<br />
Dr. Paul-Otto Fassbender<br />
CEO AR<strong>AG</strong> Legal Insurance<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 32<br />
Focus Insurance<br />
AR<strong>AG</strong> Rechtsschutz<br />
Professional management of operational risk<br />
The AR<strong>AG</strong> group uses ProKoRisk <strong>®</strong> to optimise its<br />
OpRisk system<br />
Operating in twelve European countries and the USA, AR<strong>AG</strong> is one of the<br />
world’s three largest providers of legal protection insurance. In Germany,<br />
the group also provides personal insurance as well as property, third-party,<br />
accident and motor insurance. The largest German family-owned insurance<br />
company developed a differentiated concept of tackling operational risk<br />
at an early stage, which was then implemented on a group-wide basis. In<br />
2006, AR<strong>AG</strong> made the decision to introduce a professional software solution<br />
to effi ciently support the operational risk management processes.<br />
The aim of the investment was to reduce the amount of human resources<br />
required to carry out risk inventories in order to accelerate risk identifi cation<br />
and assessment processes. <strong>ifb</strong> group were awarded the contract to<br />
transfer AR<strong>AG</strong>’s existent and complex professional operational risk management<br />
concept (OpRisk) into a software-supported solution. The decisive<br />
factors that supported the choice of partner were extensive coordination<br />
between the concepts and the high level of professional expertise<br />
of both parties. These factors guaranteed the timely implementation of a<br />
high performance OpRisk system throughout the group.<br />
Clearly defi ned requirements<br />
AR<strong>AG</strong>’s software decision was based on comprehensive performance specifi<br />
cations formulating the system’s contextual requirements. These guidelines<br />
simultaneously aimed to create optimal conditions for implementing<br />
the solution in all the group companies.<br />
The main criteria included:<br />
An automated, centrally controlled process for the implementation,<br />
assessment and reporting of risk inventories.<br />
Clear allocation of operational risk to organisational units and principal<br />
departments at the group holding company, insurance companies and<br />
service providers.<br />
Optimal user orientation and motivation through a user screen design<br />
based on the corporate design of individual group companies and an<br />
English/German dual language layout.<br />
A differentiated role and user concept in consideration of the high standards<br />
of AR<strong>AG</strong> group IT security.<br />
Straightforward integration of the software into the group IT landscape<br />
and an auditable historisation of risk data.
OpRisk as an integral company process component<br />
Following evaluation of the ProKoRisk <strong>®</strong> software solution on the basis of<br />
the performance specifi cations, the contextual defi nition of the planned<br />
solution was punctually concluded. In the course of implementation, the<br />
project team focussed principally on the working process and motivation<br />
of the users. In order to ensure a smooth transfer onto the web-based system,<br />
the routine procedure familiar to all the participants was adopted. At<br />
the same time, in terms of the user interface design, <strong>ifb</strong> group software<br />
specialists maintained close consistency with the corporate design of the<br />
individual AR<strong>AG</strong> group companies in order to identify the OpRisk application<br />
as an integral component of the corporate processes. The screen<br />
design and the user language on every group unit are activated automatically<br />
– independent of the risk manager log-in. The AR<strong>AG</strong> group carries out<br />
quarterly risk inventories with the participation of around one hundred<br />
decentralised risk managers, who process all the risks within their area of<br />
responsibility via a web interface in ProKoRisk <strong>®</strong> . Consequently, the project<br />
team developed a differentiated role and access rights system using specifi<br />
c access right fi lters. Commensurate with the high standards of security<br />
at AR<strong>AG</strong>, ProKoRisk <strong>®</strong> only allows the central risk manager to access all the<br />
risk data. In line with the AR<strong>AG</strong> concept, the central risk manager is the<br />
only individual with the possibility to generate reports, carry out plausibility<br />
tests and amend or add to master data. The fl exibility of ProKoRisk <strong>®</strong><br />
ensured that all these requirements were met without problem within the<br />
tight schedule.<br />
Effective practical reporting and high level of acceptance<br />
The AR<strong>AG</strong> group uses ProKoRisk <strong>®</strong> to carry out a potential-dependent classifi<br />
cation of all identifi ed operational risks and, on this basis, defi nes a<br />
risk-specifi c auditing and reporting interval. Reporting frequency can be<br />
adapted at any time for both selected risks and the entire risk stock. In<br />
order to ensure that the risk management system provides the group management<br />
with all the relevant facts without producing a surplus of information,<br />
the project team developed a portfolio of standard reports. If<br />
necessary, additional reports can be generated quickly and easily using the<br />
ProKoRisk <strong>®</strong> Report-Designer. Through the introduction of ProKoRisk <strong>®</strong> , the<br />
AR<strong>AG</strong> group was able to further increase the level of acceptance of the<br />
risk management system in all group units. Above all, risk managers valued<br />
the unambiguous web-based user screen and considered ProKoRisk <strong>®</strong> to be<br />
extremely comprehensible and intuitively easy to operate. In the interests<br />
of the ongoing development of the operational risk management system,<br />
measures had already been taken during the conception and implementation<br />
to allow consideration for possible add on phases. Amongst other possibilities,<br />
a loss database or chance management system can be integrated<br />
if required. As such, AR<strong>AG</strong> were also comprehensively impressed with the<br />
OpRisk solution in view of its future security.<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 33
Hannes Polit<br />
<strong>ifb</strong> group<br />
IFRS financial<br />
statements<br />
Technical<br />
project<br />
Implementation<br />
project<br />
Milestones<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 34<br />
Focus Insurance<br />
Versicherungskammer<br />
V<br />
Bayern<br />
Insurance nsurance su a ce co<br />
company company ‘Versicherungskammer<br />
Bayern‘ to implement im<br />
IFRS accounting as of 2009<br />
The group-wide implementation<br />
of IFRS by VKB is a<br />
highly complex task raising<br />
a multitude of specialist<br />
and system-related questions.<br />
Thanks to <strong>ifb</strong> support<br />
the project is already at<br />
an advanced stage and<br />
will consequently create<br />
optimal conditions for compiling<br />
the balance sheet<br />
in accordance with IFRS<br />
regulations in future.<br />
Hubertus von der Schulenburg<br />
project manager ‘Introduction<br />
of IFRS Accounting‘<br />
Versicherungskammer Bayern<br />
2006 2007 <strong>2008</strong> 2009<br />
Program management<br />
Overall<br />
concept<br />
Actuarial practice<br />
Capital assets<br />
Accounting and reporting<br />
Group<br />
START Completion of<br />
overall conception<br />
phase<br />
Process and implementation model for IFRS introduction<br />
<strong>ifb</strong> group supports the project to effect group-wide<br />
conversion from German GAAP (HGB) to IFRS<br />
Not only insurance groups listed on the stock exchange, but also an increasing<br />
number of public-sector insurance companies are also transferring to<br />
IFRS accounting. As the largest insurance company of the German Sparkassen-Finanzgruppe,<br />
the Versicherungskammer Bayern (VKB) will also be<br />
carrying out their accounting in accordance with IFRS in future. Firstly, this<br />
ensures future comparability with other major insurance groups, and secondly,<br />
it also provides VKB with the long-term option of procuring equity<br />
or borrowed capital on the capital markets.<br />
Individual IFRS interpretation and implementation<br />
The decisive factor for success is to ensure that specifi c performance parameters<br />
are consistently allied to operative implementation. Only by individually<br />
interpreting the standards in line with the specifi c circumstances<br />
prevailing at VKB can the successful and targeted implementation of the<br />
project be guaranteed. To this end, a multi-stage implementation model<br />
was developed that is individually tailored to the specifi c requirements<br />
and needs of VKB. The model considers all relevant VKB departments,<br />
encompassing accounting both at group level and within the individual<br />
companies, through to capital assets, actuarial activities and data processing,<br />
as well as knowledge gained in a preliminary IFRS study. The model<br />
comprises:<br />
1. Which IFRS interim statements require compilation and when this needs<br />
to be done by in order to prepare a complete IFRS annual fi nancial statement<br />
as per 31 December 2009?<br />
2. The central technical project is divided into an overall and a detailed<br />
conception phase and forms the technical basis of the project.<br />
3. The implementation project comprises implementation of the specifi c<br />
technical aspects, together with adjustment of DP, processes and organisational<br />
structures (P&O), and is effected at both group level and<br />
within the individual subsidiaries.<br />
Test financial statement 2007 Opening balance sheet Financial<br />
Half-year<br />
statement<br />
Historisation IFRS booking <strong>2008</strong><br />
DP systems<br />
Specific technical implementation aspects<br />
Processes and organisation<br />
Subsidiaries<br />
Specific technical implementation aspects<br />
Processes and organisation<br />
Completion of detailed<br />
conception phase<br />
Program management<br />
Financial statement<br />
Half-year<br />
Opening IFRS half-year financial statement<br />
balance sheet<br />
prepared<br />
PROJECT CONCLUDED<br />
GOING LIVE systems
Specifi c and interdisciplinary project organisation<br />
For this project, the overall project organisation structure is primarily aligned<br />
to the three specifi c areas of actuarial practice, capital assets and accounting/reporting,<br />
as well as the two interdisciplinary areas of DP and<br />
P&O. The program management team is responsible for coordinating these<br />
fi ve specifi c areas, while a staff unit is responsible for quality assurance,<br />
which is the auditor in the case of VKB. A steering committee forms the<br />
central organ for management and coordination of the overall project.<br />
The specifi c requirement is demonstrated by the following examples:<br />
Actuarial practice: for example, the formation of deferred reserves for<br />
premium refunds on account of the fact that differences in valuation<br />
between German GAAP (HGB) and IFRS as regards life and health insurance<br />
will mean future obligations vis-à-vis insurance companies will<br />
have to be posted on the balance sheet.<br />
Capital assets: for example, classifi cation of direct investments in<br />
specifi c IFRS holding categories together with their valuation, in addition<br />
to the implementation of a parallel booking logic system.<br />
Accounting and reporting: for example, redefi nition of the consolidated<br />
group as well as conception of an IFRS annual report and an IFRS group<br />
chart of accounts.<br />
On this basis, the interdisciplinary DP implementation aims to ensure that<br />
all specifi c areas are incorporated into the IT structure. In the case of VKB,<br />
this required adjustment of the the software SimCorp Dimension, the development<br />
of an SAP FI Special Ledger solution and expansion of SAP EC-CS.<br />
In terms of P&O, the fi nancial closing processes were realigned at group<br />
and individual-company level; thus, the new IFRS requirements have been<br />
integrated into existing German GAAP (HGB) fi nancial closing processes.<br />
Factors of success during implementation<br />
Since its initiation the project has run according to plan and is now twothirds<br />
complete. All essential milestones have been achieved on schedule<br />
and within cost budgets. Compilation of the opening IFRS balance sheet<br />
to 1 January <strong>2008</strong> is anticipated by the end of June <strong>2008</strong>. A primary factor<br />
for an effi cient conversion is the centralised accounting system and capital<br />
asset management employed by VKB, which facilitated central implementation<br />
of IFRS and gave rise to a signifi cant reduction in time and expense.<br />
In introducing IFRS, <strong>ifb</strong> has pursued a pragmatic and implementation-based<br />
approach, whereby specifi c required tasks have been realistically interpreted<br />
and materiality limits practically considered. This has been undertaken<br />
in close coordination with the external auditors – presenting VKB with<br />
an ideal combination that guarantees both effi ciency and transparency.<br />
The interdisciplinary compilation of the <strong>ifb</strong> team encompassing auditors,<br />
IFRS practitioners, actuaries and IT specialists is also of particular benefi t,<br />
while the continuity of personnel in the <strong>ifb</strong> core team facilitates effi cient<br />
implementation. A primary factor for success is also the partnership-based<br />
cooperation between <strong>ifb</strong> and VKB; whereby all teams and committees are<br />
homogeneously organised so as to ensure an optimal transfer of knowledge<br />
and close cooperation. Moreover, as with numerous other projects,<br />
<strong>ifb</strong> continually pays attention to the parallel ‘coaching‘ of client personnel<br />
in order that these employees succeed in expanding their specialist knowledge<br />
during the project and are able to independently carry out the new<br />
tasks by conclusion of the project at the latest.<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 35
36<br />
Preparations for Solvency II begin with the 9th<br />
amendment of the Insurance Supervision Act<br />
(V<strong>AG</strong>) and MaRisk (VA) for insurance<br />
Nicole Fopma,<br />
Thomas Rauschen<br />
<strong>ifb</strong> group<br />
Solvency II, with its<br />
impending supervisory<br />
regulations, is already<br />
casting a shadow.<br />
Solvency II represents a<br />
challenge for corporate<br />
risk management. To this<br />
end, resolutions taken by<br />
the German Bundestag are<br />
encouraging companies to<br />
begin commensurate preparations<br />
at an early stage.<br />
Dr. Jörg von Fürstenwerth<br />
CEO of the German<br />
Insurance Association (GDV)<br />
Strategic Risk Management<br />
Risk Governance<br />
Risk Strategy<br />
Risk-bearing Ability<br />
Risk Infrastructure<br />
Control Environment<br />
(Corporate Governance)<br />
Internal Control System<br />
Internal Audit<br />
Audit-/Risk-Committee<br />
How insurance companies in Germany can effi ciently<br />
meet the new requirements<br />
The starting signal for preparations ahead of Solvency II sounded in Germany<br />
on 1 January <strong>2008</strong> when, on the basis of the 9th amendment of the<br />
Insurance Supervision Act (V<strong>AG</strong>), Section 64a V<strong>AG</strong> (Business organisation)<br />
and Section 55c (Auditing and risk reports) entered into effect. These provisions<br />
codify supervisory law requirements pertaining to risk management<br />
and reporting in insurance companies and pension funds. The regulations<br />
are substantiated by the supervisory law provisions contained within the<br />
Minimum Requirements for Risk Management in Insurance Companies<br />
(MaRisk (VA)). The communiqué based on Sections 64a and 104s V<strong>AG</strong> was<br />
published at the end of April <strong>2008</strong> in draft form and, following the consultation<br />
phase, is expected to appear in its fi nal form in October. As such, this<br />
provides an insight into the essential qualitative requirements of Pillar 2 of<br />
Solvency II at national level.<br />
Incorporation of the new solvency regulations into national law and effective<br />
introduction of the national provisions is expected by 2012. The MaRisk<br />
(VA) requirements will be effected well ahead of Solvency II given that<br />
the supervisory authority wishes to encourage the German insurance industry<br />
to ensure early preparations for the advent of supervisory standards<br />
contained within the Solvency II rules. Consequently, insurance companies<br />
should already be making preparations in order that they may benefi t at an<br />
early stage from opportunities presented by the new regulations.<br />
Content of the new requirements<br />
Section 64a V<strong>AG</strong> expressly states that the management is responsible for<br />
ensuring due and proper organisation of the business and establishing an<br />
adequate risk management system; whereby this also includes formulation<br />
of a risk strategy in line with the corporate strategy, establishment of a<br />
risk-bearing capability concept and the introduction of a limit system. The<br />
obligation to introduce an appropriate organisational structure allowing<br />
for management and monitoring of corporate risks and business processes<br />
is also expressly stated. In addition, adequate processes for identifi cation,<br />
Control Environment<br />
Strategic<br />
Risk Management<br />
Operative<br />
Risk Management<br />
Organisational Framework<br />
Organisational Framework<br />
Business strategy<br />
Structure & Resources<br />
Processes<br />
Corporate Management<br />
Operative Risk<br />
Management<br />
Risk Identification<br />
Risk Assessment<br />
Risk Controlling<br />
Risk Monitoring<br />
Internal and External Reporting<br />
The four areas of the <strong>ifb</strong> risk management framework serve as a tool to divide the new regulations into thematic elements and categories.<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08<br />
Focus Insurance
assessment, management and monitoring of essential risks are also to be<br />
introduced. As such, risk management in insurance companies will be effected<br />
on a broader basis in future and will also be linked to management<br />
processes within the company – a move that greatly surpasses current risk<br />
management requirements (e.g. Corporate Sector Supervision and Transparency<br />
Act (KonTraG)).<br />
Not all regulations represent a new move<br />
At fi rst glance the new requirements appear to be extremely extensive.<br />
However, a closer look clearly reveals that elements of the new requirements<br />
are already standard practice. For example, effective qualitative risk<br />
management processes are often already in place and contingency plans<br />
documented. Although such requirements have not been put in concrete<br />
terms to date, the establishment of a risk management system has been<br />
necessary from both a regulatory and business point of view. The main task<br />
ahead now lies in partially expanding the existing risk management system<br />
to include any missing elements, refi ning existing rules and methods,<br />
and incorporating risk management into the overall corporate management<br />
structure. In turn, this provides an opportunity to update, modernise<br />
and progressively realign outmoded risk management methods and<br />
procedures. The subsequent aim should be to intelligently link individual<br />
risk management modules and bring these into line with planning and management<br />
processes. In this respect, the focus does not purely centre on<br />
fulfi lling the requirements of future supervisory law, but, above all, lies in<br />
the added value that can be created with a well-grounded corporate risk<br />
management system. This includes qualitative effects, such as enhanced<br />
risk awareness or improved process quality, but also extends to the creation<br />
of competitive advantages.<br />
Opportunities to reduce the cost of implementation<br />
Prior to implementing the new regulations, the fi rst step is to create a clear<br />
overview of the required action, before then planning the individual implementation<br />
stages in a structured manner. The initial move is to divide<br />
the new regulations into thematic elements and categories, for example,<br />
by allocating them to the four areas of the <strong>ifb</strong> risk management framework.<br />
The next step is to examine whether any MaRisk (VA) requirements<br />
are already covered and/or whether there are methods, tools or processes<br />
already in place that can be used as a basis. A comparison of the existing<br />
risk management system with the new MaRisk requirements will elucidate<br />
the action that needs to be taken; this can then be focused on and an appropriate<br />
conception worked out.<br />
Not too early to begin implementation<br />
On this basis, the new requirements can be effi ciently implemented and<br />
associated opportunities swiftly exploited. Even at this early stage, attention<br />
should be focussing on a number of individual themes, such as the<br />
formulation of business and risk strategies or the documentation of the risk<br />
management organisation and processes, thereby allowing the company to<br />
prepare for the upcoming changes. Simultaneously, the process of ongoing<br />
analysis and updating of strategies and documentation can also be carefully<br />
implemented and integrated into existing practices. As a consequence,<br />
the Solvency II mindset is also established within the company at an early<br />
stage.<br />
Nicole Fopma<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 37
E.ON as as a a fi nancial nancial service provider provider – – the the path<br />
path<br />
to obtaining a licence in accordance with MiFID<br />
Dr. Jochen Handke<br />
E.ON Energy Trading <strong>AG</strong><br />
Carsten Freilinger<br />
<strong>ifb</strong> group<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 38<br />
Focus Corporates<br />
E.ON Energy Trading <strong>AG</strong><br />
This licence allows us to<br />
offer our clients throughout<br />
Europe a large range<br />
of fi nancial instruments in<br />
terms of risk management.<br />
<strong>ifb</strong> provided us with excellent<br />
support throughout<br />
the complex and timeconsuming<br />
licensing<br />
process.<br />
Håkan Larsson<br />
Managing Director,<br />
E.ON Portfolio Solution GmbH<br />
Phase 1<br />
Preliminary studies<br />
Elucidation of supervisory<br />
law consequences<br />
Identification of gaps<br />
in supervisory law and<br />
ascertainment of expense<br />
Evaluation of the various<br />
strategic implementation<br />
alternatives (partial/full licence)<br />
Implementation of MiFID resulted in the E.ON group<br />
requiring a licence for fi nancial service providers, for<br />
which the company subsequently founded E.ON Portfolio<br />
Solution GmbH. Throughout this task E.ON was<br />
supported by the <strong>ifb</strong> group<br />
Derivatives on the energy market have long since ceased to be a rarity.<br />
Energy suppliers and major industrial companies frequently use these fi -<br />
nancial contracts on energy products as a hedging instrument against<br />
specifi c risks pertaining to energy supply. Accordingly, the German-based<br />
multinational E.ON, one of the world’s leading power and gas companies,<br />
also advises its key customers in relation to management of their power<br />
portfolio – for instance, with respect to the use and administration of energy<br />
derivatives. Until 2007 this task was performed by E.ON Sales & Trading<br />
GmbH (business unit for customer portfolio management). However, with<br />
effect from November 2007, the EU ‘Markets in Financial Instruments Directive‘<br />
(MiFID) has required companies taking on this role to obtain a licence,<br />
in Germany from the Federal Financial Supervisory Authority (BaFin). For<br />
E.ON, the licence has the advantage of allowing the company to expand its<br />
range of fi nancial consulting products and also offer consulting on a pan-<br />
European basis in future.<br />
As a result of MiFID, a whole series of other companies operating in the<br />
energy market have been and are being obliged to apply for commensurate<br />
licences, in turn necessitating fulfi lment of the relevant comprehensive requirements<br />
and, where necessary, development of new business models.<br />
Focus on transparency<br />
The aim of commensurate incorporation of MiFID by all EU member states<br />
is to create a transparent and standard internal EU market for fi nancial<br />
Phase 2<br />
Specific conception<br />
Basis for implementation<br />
Development of business model<br />
Specific concepts for risk<br />
management and reporting<br />
Formulation of information<br />
system requirements<br />
Development of organisational<br />
structure in compliance with<br />
supervisory law<br />
Preparation of BaFin licence<br />
application<br />
Phase 3<br />
Implementation<br />
Implementation of organisational<br />
structure and processes<br />
Data processing conception<br />
Data processing implementation<br />
Mapping of<br />
supervisory<br />
law requirements<br />
October 2006 June 2007 October 2007<br />
The planning and implementation process through to licence issue
service providers. Additional MiFID objectives are to protect the functioning<br />
of the capital market, ensure increased capital market effi ciency and<br />
provide better protection for investors.<br />
These changes had considerable consequences for E.ON Sales & Trading<br />
GmbH in that, with effect from 1 November 2007, their customer portfolio<br />
management services were classifi ed as fi nancial services requiring a BaFin<br />
licence. This situation presented E.ON with a multitude of options, the advantages<br />
and disadvantages of which have been thoroughly analysed with<br />
the aid of <strong>ifb</strong>. As an example, licensing E.ON Sales & Trading GmbH in full<br />
was a conceivable option, as was the establishment of a new independent<br />
entity.<br />
Wholly in line with the intention of MiFID – which affords customer interests<br />
pre-eminent status – E.ON opted to establish a new company that operates<br />
independently of other E.ON entities, namely, E.ON Portfolio Solution<br />
GmbH. Since December 2007, the new company has taken over services<br />
provided by the previous customer portfolio management business unit<br />
and also offers a host of additional services such as investment consulting,<br />
fi nancial portfolio management or investment and contract broking. These<br />
areas of business have also been considered within the scope of licensing.<br />
From concept to licence<br />
Despite an early beginning back in October 2006, preparations for the<br />
licensing process were subjected to intensive time constraints owing to<br />
the fact that fi nal amendments to national supervisory law were only fi rst<br />
published in May 2007. Numerous stages of the project needed to be carried<br />
out in parallel. In a fi rst step, <strong>ifb</strong> and E.ON employed preliminary studies to<br />
explore the consequences for E.ON‘s customer portfolio management that<br />
would ensue from the changes in supervisory law. Various possible business<br />
models were developed, with critical IT systems identifi ed and assessed in<br />
light of both commercial and supervisory law requirements. Following<br />
selection of the business model, the specialist risk management and reporting<br />
conception phase was implemented by summer 2007. Parallel to this<br />
task, work on the licensing and implementation of the necessary processes<br />
was also initiated. Ultimately, the entire process from business idea to<br />
issuing of the licence took one year, with the newly established E.ON Portfolio<br />
Solution GmbH commencing business operations on 5 December 2007.<br />
Through the BaFin licence, E.ON not only fulfi ls the new requirements of<br />
supervisory law, but is also able to offer an expanded range of fi nancial<br />
instruments relating to risk management. As an example, hedging instruments<br />
such as futures or swaps can now be considered without limitation<br />
as regards the preparation of risk strategies or consulting and broking<br />
of trading operations. In light of the ongoing development of the energy<br />
market, these instruments are playing an ever-greater role within the scope<br />
of energy supply. The new licences also strengthen E.ON‘s position as a<br />
competitor to banks that are becoming increasingly active on the energy<br />
market. Moreover, the newly introduced ‘European passport‘ allows E.ON<br />
fi nancial services to be offered in future throughout Europe without the<br />
need to apply for national licences in each individual country.<br />
Customers of E.ON Portfolio Solution GmbH are also afforded greater transparency<br />
through its role as an independent agent, given that the company<br />
does not solely provide E.ON group fi nancial instruments, but also offers<br />
other providers‘ products. As a result, the customer gains a comprehensive<br />
and transparent overview of both the market and available instruments.<br />
Carsten Freilinger<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 39
Governance, risk and compliance<br />
in a mechanical engineering company<br />
Willy Holtkamp<br />
<strong>ifb</strong> group<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 40<br />
Focus Corporates<br />
How an ICS project audit can increase transparency<br />
and profi tability<br />
GRC rules impose a binding framework on corporate management. These<br />
include laws such as the Sarbanes-Oxley Act (SOX), quality and best practice<br />
standards such as COSO II, CobiT and ITIL as well as auditing standards<br />
and internal guidelines.<br />
However, the fact that compliance with all statutory provisions alone will<br />
not suffi ce, is ably demonstrated using the example of a successful German<br />
mechanical engineering company that has a host of production and sales<br />
companies both in Germany and abroad. In order to bring its governance<br />
compliance system up to the requisite US-SOX level, in close coordination<br />
with its auditor, the company combined the COSO model and the CobiT<br />
best practice approach to IT into a uniform GRC framework.<br />
Ostensibly this served to cover a host of relevant SOX and GRC requirements.<br />
However, despite this move, the system did not prevent considerable<br />
losses occurring primarily as a result of unexpected or recognised, but<br />
underestimated, risks incurred with corporate projects.<br />
A brief analysis by the <strong>ifb</strong> group showed that<br />
the ICS was not suffi ciently supported by IT<br />
processes within the group – including project management processes<br />
– were not uniformly defi ned, evaluated or documented<br />
project reports were not always suffi ciently up-to-date<br />
Resolution of these problems occurred in two phases with the aid of <strong>ifb</strong>:<br />
Phase 1: analysis and improvement of the existing GRC system, above all<br />
by eliminating control and management weaknesses in group-wide processes.<br />
Phase 2: analysis and optimisation of the existing internal control system<br />
(ICS) for project risks within the scope of an ICS project audit with the aim<br />
of identifying structural risk potential at an early stage of project management<br />
and installing commensurately effective protective measures.<br />
Integrated GRC model architecture<br />
Level 1 regulatory environment<br />
Harmonisation of regulatory requirements, such as SOX variations, the EU 8th Directive,<br />
German Corporate Governance Code, international laws etc.<br />
Level 2 internal control environment<br />
Interlocking of control framework and application of Best Practice according to COSO, CobiT etc.<br />
Level 3 processes<br />
Control objectives and measures, risk controlling, early warning system, control maturity model.<br />
Level 4 IT support<br />
Monitoring/assessment of IT efficiency, data security, dataflow etc.<br />
Integrated GRC model architecture affording consideration of regulatory environment, the internal control environment, processes and IT support
Phase 1: GRC optimisation<br />
Firstly, on the basis of the above-stated defect analysis, a precise and integrated<br />
GRC model architecture was developed (see illustration) and documented<br />
in the redesigned compliance policy. This new GRC architecture<br />
integrated the following four levels: regulatory environment, internal control<br />
environment, processes, and IT support. In line with the ‘COSO cube‘,<br />
the following three dimensions were also included: eight enterprise risk<br />
components, four entity units and four objective categories.<br />
As a result, company practice in terms of GRC became simpler, more unifi<br />
ed and gained considerably greater transparency thanks to the internal<br />
GRC reporting process. Adherence to the new compliance policy is analysed<br />
quarterly by means of internal auditing, as is the ongoing development of<br />
ICS quality using a maturity model.<br />
For the purpose of optimising IT support, the obsolete IT system pertaining<br />
to the ICS was also replaced by the latest <strong>ifb</strong> ProKoRisk <strong>®</strong> software.<br />
Phase 2: ICS project audit<br />
Building on this, the ICS project audit followed in a second phase; whereby<br />
the defect analysis effected in phase one was completed and, amongst<br />
other things, a term repository was also formulated. In addition, the ICS<br />
project audit included defi nition and introduction of an IT-supported project<br />
risk early warning system.<br />
Specifi c optimisation measures of the ICS project audit are demonstrated<br />
by way of the following two examples:<br />
1. A new project guide was developed, using precise defi nitions to ensure<br />
that verbal assessments of risks and opportunities can be numerically<br />
arranged. This is a useful tool, for example, in the risk early warning system,<br />
where it allows the signifi cance of negative variations from planning<br />
to be immediately assessed. Moreover, the binding term repository<br />
ensures that projects and their associated risks and opportunities are<br />
classifi ed and evaluated according to clear uniform criteria.<br />
Additionally, the earned-value principle was introduced for all projects.<br />
This presents project costs incurred to date against the progress achieved<br />
by the project. As such, this function provides important key ratios<br />
that enable comprehensible and uniform assessment of risk. The process<br />
is also continuously monitored technically by means of the ProKoRisk <strong>®</strong><br />
2.<br />
Active Communication Server.<br />
Following implementation of a bundle of prioritised measures, the mechanical<br />
engineering company now has an integrated ICS boasting high practical<br />
utility that links seamlessly into the GRC environment. As a result, the<br />
ICS provides the key components of the group-wide risk management system<br />
and has a process-based structure. This in turn enables the success of<br />
corporate projects to be enhanced by way of fulfi lling GRC requirements.<br />
In the project risk management example, this translates into high transparency<br />
in terms of risks, costs and the status of projects, while simultaneously<br />
facilitating standardised risk assessments and protective measures<br />
and thus a reduction of losses stemming from unsuccessful projects.<br />
Willy Holtkamp<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 41
Incorporating individual requirements<br />
within risk management<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 42<br />
Focus Corporates<br />
Hamburg Port Authority<br />
Carsten Spieck<br />
Hamburg Port Authority<br />
Holger Kruse<br />
swb Erzeugung GmbH & Co. KG<br />
Manuela Nuhn,<br />
Lars Tybussek<br />
<strong>ifb</strong> group<br />
RCM – Information and decision-making fl ow (vertical/horizontal)<br />
Hamburg Port Authority and swb <strong>AG</strong> convert their<br />
company-wide risk/opportunity management systems<br />
using ProKoRisk <strong>®</strong><br />
In less than a decade, risk/opportunity management (ROM) has developed<br />
into a central corporate management instrument. Recognition of the fact<br />
that a systematic approach to risks and opportunities will sustainably increase<br />
both the earnings security and performance of a company has led<br />
to ever-greater differentiation in terms of adapting the ROM system to the<br />
individual aspects of the respective company. Moreover, that this trend<br />
particularly lends itself to the application of standard software is ably evidenced<br />
by ProKoRisk <strong>®</strong> . The <strong>ifb</strong> group ROM software solution is characterised<br />
by its high fl exibility in terms of implementing specifi c company requirements<br />
and offers all the advantages of a fully developed, advanced<br />
solution.<br />
In this respect, some of the major benefi ts include support for all processes<br />
of risk/opportunity management, functionally reliable embodiment<br />
throughout the company and user-friendliness. At the same time, ProKo-<br />
Risk <strong>®</strong> guarantees clear-cut and effi cient processes: automated monitoring,<br />
early warning and communication functions relieve risk managers of timeconsuming<br />
routine tasks and guarantee maximum functional security of<br />
the entire system. Company-wide documentation and assessment cycles<br />
are independently organised by the software: the current position remains<br />
transparent at all times and is communicated via specifi c customised reports.<br />
All loss-incurring events are historicised within the system, with a<br />
system-based database provided for central data storage. ProKoRisk <strong>®</strong> is<br />
compatible with all standard database platforms and can also be made immediately<br />
available throughout the entire corporate group as a web-based<br />
solution.<br />
Supervisory<br />
board meeting<br />
(at least once a year)<br />
Department head meeting<br />
Department head, staff council representative,<br />
directors as necessary (generally once a week)<br />
Departmental routine<br />
Department head, process managers, administrators, controllers<br />
(generally every two weeks)<br />
Process routines<br />
Process managers and department managers (generally once a week)<br />
Department/office meetings, if necessary<br />
Management and staff (as required)
ROM system for the Port of Hamburg – HPA masters a complex<br />
range of tasks<br />
Just how complex requirements can be that are effi ciently implemented<br />
with ProKoRisk <strong>®</strong> is clearly demonstrated by means of a ROM project which<br />
the Hamburg Port Authority (HPA) implemented in cooperation with the<br />
<strong>ifb</strong> group. The company emerged as a public-law corporation from the Hanseatic<br />
city‘s electricity and port administration in 2005. Tasked with offering<br />
users of the second largest European container port the best possible<br />
framework conditions for freight handling, HPA‘s activities are accordingly<br />
complex in terms of economic and political priorities: port development<br />
planning, maintaining the Elbe as a waterway and ensuring that shipping<br />
traffi c runs smoothly are all tasks that fall within the remit of the HPA. It is<br />
responsible for the maintenance, expansion and modifi cation of quayside<br />
walls, moorings, open areas, bridges, streets and track systems – in other<br />
words, practically the entire port infrastructure. Moreover, mooring administration,<br />
port railway operations and supply and waste disposal utilities<br />
also count amongst its functions.<br />
Providing a ROM system capable of appropriately integrating all these<br />
areas required intensive cooperation on the part of experts from all divisions<br />
of the port authority, who fi rst had to familiarise themselves with the<br />
mode of operation and commercial possibilities of a company-wide ROM<br />
system. Through dialogue with the protagonists, it soon became clear that<br />
the primary challenge would lie in incorporating the risk/opportunity system<br />
within the established cooperation processes between the thematically<br />
very different company divisions. In addition, a further factor was to<br />
supplement risk identifi cation and assessment with a process enabling actuarial<br />
consideration of individual risk potential.<br />
Win-win scenario for the company and the Hanseatic city of<br />
Hamburg<br />
Accordingly, the project team anticipated complex tasks in relation to the<br />
inventorisation and quantifi cation of all relevant risks and opportunities.<br />
Given its particular role as a public-law company the HPA is also intricately<br />
bound with the Hanseatic City of Hamburg in various areas of liability.<br />
One of the central tasks incumbent upon the project team was to allocate<br />
individual risks to the various company units with binding effect while<br />
nonetheless affording consideration to HPA processes, and to defi ne<br />
appropriate early warning indicators and, if necessary, additional control<br />
measures. The selected organisational model centrally allocates risk<br />
responsibility to managers of the individual company units, who for their<br />
part then orientated the processes in line with the individual features of<br />
their area. Mapping in ProKoRisk <strong>®</strong> also occurred on the basis of this organisational<br />
structure.<br />
The user-friendly procedures for inventory, assessment, monitoring, early<br />
warning, reporting and controlling paved the way for smooth integration<br />
of the ROM system into business processes, which in turn has given rise to<br />
a high degree of acceptance on the part of those tasked with responsibility<br />
for risk management and process organisation. The extent to which<br />
Germany‘s largest port operator recognises the system‘s practical commercial<br />
potential is evidenced, not least, by the fact that the number of software<br />
user-stations was increased from the original fi gure of 25 to 60.<br />
><br />
In terms of its specifi c daily<br />
activities, HPA is diffi cult<br />
to compare with other companies<br />
owing to the highly<br />
specialised, function-oriented<br />
structure, which needs<br />
to be coordinated within<br />
the scope of an extremely<br />
dynamic port company.<br />
Also of importance is the<br />
fact that the effi cient and<br />
reliable running of Hamburg<br />
port operations can<br />
only be assured through<br />
the longstanding, exceptionally<br />
multifaceted knowhow<br />
within our company.<br />
Working with <strong>ifb</strong>, both of<br />
these factors were optimally<br />
incorporated into the<br />
risk management system<br />
processes.<br />
Tino Klemm<br />
Division Manager,<br />
Finance and Accounting<br />
Hamburg Port Authority<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 43
Department risk<br />
manager<br />
Assesses risks<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 44<br />
Focus Corporates<br />
swb Erzeugung Erze<br />
GmbH<br />
& Co. KG<br />
Our decided objective<br />
was to develop a companyspecifi<br />
c risk/opportunity<br />
management system that<br />
could be transferred from<br />
the pilot company to all<br />
group units and which<br />
would refl ect the clear<br />
responsibilities within a<br />
role-based workfl ow<br />
concept. This was easily<br />
achievable using the<br />
ProKoRisk <strong>®</strong> software.<br />
Andreas-Robert Hartung<br />
Head of Investment<br />
Controlling and Treasury,<br />
swb Erzeugung GmbH &<br />
Co. KG<br />
Group-wide risk management system for Bremen-based<br />
swb Group<br />
The focus of the risk management project (RM project) undertaken for the<br />
swb Group centres on implementing both the management philosophy<br />
and the new process requirements of the corporate group with a softwaresupported<br />
system that also supported corresponding procedures within<br />
the swb Group risk/opportunity management system.<br />
As one of Germany‘s most established utility companies, swb has undergone<br />
dynamic development within the scope of energy market deregulation.<br />
Employing over 2,400 personnel, the swb Group is today positioned<br />
as a supplier of electricity, natural gas, drinking water and heating<br />
energy. Moreover, in the waste to energy business division swb occupies<br />
a leading position in Northern Germany, with technical services rounding<br />
off the comprehensive service range. Under the swb <strong>AG</strong> umbrella, the<br />
various group companies are each tasked with clear-cut areas of responsibility.<br />
Against the background of a challenging competitive environment and<br />
increasing market differentiation, swb plans to provide uniform support<br />
for risk management in all group companies in future by introducing highperformance<br />
standard software – a consequent opportunity to improve<br />
the assessment and management of risks and opportunities as a whole at<br />
group level.<br />
As a long-standing partner to the energy supplier in questions of risk management,<br />
the <strong>ifb</strong> group was commissioned with initially implementing<br />
the RM system using the current version of ProKoRisk <strong>®</strong> at energy provider<br />
swb Erzeugung GmbH & Co. KG. As such, the energy company effectively<br />
functioned as a pilot for the entire project. A central requirement of<br />
the software solution was the development and mapping of a workfl ow<br />
concept that ensured group-wide updating, approval and assessment of<br />
risks/opportunities, measures and possible incidence of loss. At the same<br />
time, a further task was to introduce an access-rights system to allow processing<br />
by the responsible personnel. This took into account the multi-level<br />
risk management process – from the operative implementation incumbent<br />
Company risk<br />
manager<br />
Change in status<br />
• Checks<br />
assessment<br />
• Prepares reports<br />
Change in status<br />
Prepares reports<br />
Change in status<br />
Risk database<br />
Group risk<br />
manager<br />
• Up to six status levels can be used. Read and write access rights can be allocated for each status level.<br />
• Processing can be managed in line with user needs by allocating different staff to the various workflow steps.<br />
Filter and status concept: optimum workfl ow support<br />
Risk processing<br />
completed
upon the departmental head and control via the company risk manager,<br />
right through to coordination at group risk management level. The aim<br />
in this respect was to achieve a greater degree of standardisation in order<br />
to create system-inherent functional security and meet the requirements<br />
for future implementation of a standard system solution on a group-wide<br />
basis.<br />
Workfl ow concept for a standardised total solution<br />
On this basis, the RM process in ProKoRisk <strong>®</strong> has been subsequently structured<br />
to allow each user to immediately recognise and carry out their current<br />
tasks without further coordination and forward the fi le within the<br />
processing chain. The level of standardisation achieved using this workfl ow<br />
concept offers all those involved in the risk management process a high<br />
degree of transparency and security, which in turn enhances motivation.<br />
The ProKoRisk <strong>®</strong> database concept also contributes in this respect in that the<br />
data bank structure simplifi es the standardised information level provided<br />
to all risk management process personnel and those involved in internal<br />
auditing.<br />
In addition, to ensure optimal support for the work and information fl ow<br />
within the risk management system, the project team also tailored a number<br />
of the ProKoRisk <strong>®</strong> functions to the specifi c needs of swb Erzeugung GmbH<br />
& Co. KG. Accordingly, the software solution now allows data attachments<br />
to be added to the data record pertaining to each individual risk, measure<br />
and loss event, in order to provide others involved with additional information<br />
material, avoid duplication and limit the effort required.<br />
The ProKoRisk <strong>®</strong> email concept was also expanded in such a manner that it<br />
not only undertakes early warning tasks, but, for example, also provides<br />
immediate information on newly established risks. Additional functions<br />
can also be expanded according to need. Following its successful introduction<br />
at swb Erzeugung GmbH & Co. KG, ProKoRisk <strong>®</strong> will then be rolled out<br />
on a group-wide basis.<br />
In its continual development of ProKoRisk <strong>®</strong> , the <strong>ifb</strong> group pays particular<br />
attention to expanding additional functionalities in line with client needs<br />
and incorporating these within the overall concept of the software solution.<br />
With their distinct task emphasis and objectives, the projects undertaken<br />
for the Hamburg Port Authority and swb Group are clear examples<br />
of how application of ProKoRisk <strong>®</strong> standard software can provide a swiftly<br />
achievable, successful solution for meeting highly individual risk and<br />
opportunity management needs.<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 45
The evolution of business intelligence<br />
Michael D. Hoffmann<br />
<strong>ifb</strong> group<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 46<br />
Focus Corporates<br />
CxO<br />
Manager<br />
Power Users<br />
Analysts<br />
Business<br />
applications phase<br />
(1980s)<br />
strategical<br />
tactical<br />
operational<br />
Overview of current developments and future trends<br />
Following introduction of business applications in the mid-eighties, reporting<br />
and analysis processes have further developed in a number of phases<br />
with different core themes. The arrival of the BI concept at the start of the<br />
1990s initially gave rise to a phase of data centralisation, whereas today,<br />
optimisation is primarily focussed on data optimisation and process integration.<br />
In future, the scope of application areas and the importance of<br />
forward-looking analyses will further increase.<br />
Business applications phase<br />
In the mid-1980s, the central task of IT departments was focussed on introducing<br />
new software solutions for specifi c business areas: ERP and PPS systems,<br />
along with centralised electronic accounting and order processing,<br />
whereby each system was equipped with its own data structures and a<br />
function capable of producing the notorious printouts on green and white<br />
lined continuous-feed paper.<br />
Applications introduced in the various departments were mostly used by<br />
the relevantly responsible personnel and only delivered extremely limited<br />
and static evaluations due to the fact that adaptation was such a complicated<br />
task.<br />
At that time, the challenge for the company management lay in creating<br />
a consolidated overview of the status and development of the company<br />
from the diverse data stores. This was achieved on the basis of statistical<br />
reports that, focussing on operative activities, presented an overall view of<br />
the respective business areas, such as sales, production, fi nances or personnel.<br />
Linking the individual areas was extremely long-winded and could only<br />
really be effected by highly experienced managers.<br />
Company information generated in such a manner required considerable<br />
processing times and enormous manual effort in terms of preparing<br />
reports – a situation that still occurs in some companies today. Throughout<br />
the 1980s, this gave rise to the desire for a company-wide standard<br />
Scope Pyramid<br />
CxO<br />
Manager<br />
Power Users<br />
Analysts<br />
Data<br />
centralisation phase<br />
(1990s)<br />
strategical<br />
tactical<br />
operational<br />
Today, thanks to the evolution of business intelligence, company data is not only used at an operational or tactical level,<br />
but is also being increasingly employed for strategic decisions.<br />
CxO<br />
Manager<br />
Power Users<br />
Analysts<br />
Data optimisation and<br />
process integration phase<br />
(2000s)<br />
strategical<br />
tactical<br />
operational
approach based on central parameters and company ratios: production and<br />
sales fi gures, costs, income and much more – which Howard Dresner referred<br />
to under the term ‘business intelligence‘.<br />
Data centralisation<br />
Then, at the start of the 1990s, came the data centralisation phase. Comprehensive<br />
data warehouse and databank consolidation projects were<br />
introduced for the purpose of creating a so-called single point of truth<br />
within the company, a central point of access for all critical corporate data.<br />
In successful cases, analytical tools and management information systems<br />
suddenly became available that allowed company-wide access to central<br />
information. For the fi rst time, decisions at a tactical level could now be<br />
taken on the basis of almost real-time data.<br />
Data optimisation and process integration<br />
Today, in the decade of data optimisation, in addition to further technological<br />
development of the available tools, attention is primarily focussed<br />
on data quality and process integration. The enormous fl ow of data<br />
generated by modern companies to facilitate the operative processing of<br />
in-house functions needs to be qualitatively organised both prior to and<br />
after technical consolidation before it can be used in tactical and strategic<br />
decision processes.<br />
The desire for increased process integration of business intelligence systems<br />
has also given rise to a new genre of BI tools, namely so-called Business<br />
Performance Management (BPM) or Enterprise Performance Management<br />
(EPM) systems. Behind this new generic term lies a necessity to expand the<br />
‘information highway‘ – which to date has only travelled in one direction,<br />
i.e. from the systems to the decision-makers – by a further possibility allowing<br />
the decisions made to be fed back into the BI systems. Filtering out<br />
the previous business year‘s sales fi gures from corresponding BI systems in<br />
order that they can be manually fed into other systems within the scope<br />
of planning the next calendar year generates a media break that can be<br />
prevented by ensuring appropriate integration.<br />
These days all major BI software manufacturers offer commensurate<br />
components within their BI suites to facilitate integrated planning. Thus,<br />
through intelligent project implementation and corresponding know-how,<br />
the introduction of a BI solution can also cover the sections of planning and<br />
consolidation.<br />
The signifi cance of progressive analyses (‘predictive business intelligence‘)<br />
will increase considerably in future. Moreover, this will not simply be a<br />
question of so-called data mining – in other words, the recognition of patterns<br />
in inventory data – but rather will involve support for the decisionmaking<br />
process and the extrapolation of conclusions, practically a further<br />
developed trend analysis. This is a process to which the BI providers will<br />
afford high priority in terms of research and development in the coming<br />
years.<br />
Michael D. Hoffmann<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 47
<strong>ifb</strong> <strong>Annual</strong> 07/08 48<br />
Insight International activities<br />
International activities<br />
selected <strong>ifb</strong> projects<br />
<strong>ifb</strong> group<br />
<strong>ifb</strong> <strong>AG</strong>, Germany<br />
<strong>ifb</strong> Americas Inc., USA<br />
<strong>ifb</strong> Asia Ltd., China<br />
<strong>ifb</strong> Austria <strong>AG</strong>, Austria<br />
<strong>ifb</strong> Czech Republic s.r.o., Czech Republic<br />
<strong>ifb</strong> France s.a.s, France<br />
<strong>ifb</strong> Hungary Kft., Hungary<br />
<strong>ifb</strong> International <strong>AG</strong>, Switzerland<br />
<strong>ifb</strong> Lux S.A., Luxembourg<br />
<strong>ifb</strong> Slovakia s.r.o., Slovakia<br />
<strong>ifb</strong> Suisse <strong>AG</strong>, Switzerland<br />
2 Innovate IT, Uruguay<br />
FS Technology Sp. z o.o., Poland<br />
Corporates in association with <strong>ifb</strong> group<br />
<strong>ifb</strong> Lux-Audit S.à r.l., Luxembourg<br />
<strong>ifb</strong> Treuhand <strong>AG</strong> Wirtschaftsprüfungsgesellschaft,<br />
Germany
<strong>ifb</strong> <strong>Annual</strong> 07/08<br />
49
50<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08<br />
Insight Events<br />
07/08 Events<br />
2nd half-year, 2007<br />
New headquarters for <strong>ifb</strong> <strong>AG</strong> in Cologne<br />
20 August 2007. In spring 2009, <strong>ifb</strong> <strong>AG</strong> will be leaving its<br />
present headquarters at Cologne’s Neumarkt and moving<br />
to a new building complex at Rheinauhafen. This complex<br />
will provide an anticipated 400 employees in Cologne with<br />
around 7,000 m² of attractive offi ce, work and conference<br />
rooms.<br />
<strong>ifb</strong> BankPraxis 2007 for private and<br />
special-purpose banks<br />
20 September 2007. Numerous special-purpose and private<br />
bank experts and management members met in Cologne<br />
for the specialist conference ‘<strong>ifb</strong> BankPraxis – Forum for<br />
Special-purpose and Private Banks‘. Experts from prominent<br />
banks and <strong>ifb</strong> group consultants discussed new sales<br />
management, risk management and accounting solutions.<br />
<strong>ifb</strong> Lux S.A. expands Administrative Board<br />
25 October 2007. <strong>ifb</strong> Lux S.A. has appointed two<br />
experienced specialists on the Luxembourg fi nancial hub<br />
to its Administrative Board: Ernst-Dieter Wiesner, member<br />
(CEO) of the Executive Board of HVB Banque Luxembourg<br />
S.A., and Mirko von Restorff, former Management Board<br />
member of Sal. Oppenheim jr. & Cie. (Luxembourg) S.A.<br />
<strong>ifb</strong> Treuhand <strong>AG</strong> Wirtschaftsprüfungsgesellschaft<br />
opens branch in Munich<br />
19 November 2007. In addition to its offi ces in Cologne,<br />
<strong>ifb</strong> Treuhand <strong>AG</strong> Wirtschaftsprüfungsgesellschaft has now<br />
opened a branch in Munich. In spring <strong>2008</strong>, the branch<br />
is due to be expanded to form a joint-branch with <strong>ifb</strong> <strong>AG</strong>.<br />
<strong>ifb</strong> GenoPoint tours Germany for<br />
the fi rst time<br />
22 November 2007. In 2007, the much-visited <strong>ifb</strong><br />
GenoPoint forum for cooperative banks toured Germany<br />
for the fi rst time. Supplementary to the main event on<br />
22 November in Cologne, <strong>ifb</strong> GenoPoint was also held at<br />
Stuttgart, Hanover and Leipzig. In addition and for the<br />
fi rst time, <strong>ifb</strong> also held a GenoPOINT special on the theme<br />
of market price risk management.<br />
Close Cycle Rankings 2007<br />
15 November 2007. In the ‘Close Cycle Rankings<br />
2007‘, <strong>ifb</strong> group and BPM International compared the<br />
close cycle times of large companies from a variety of<br />
countries. The trend towards increasingly shorter close<br />
cycle times is primarily evident in Europe, while in the<br />
USA the closing process has slowed by an average 10%.<br />
1st half-year <strong>2008</strong><br />
1st half-year, <strong>2008</strong><br />
Christian Moser appointed to <strong>ifb</strong> <strong>AG</strong><br />
Executive Board – new associate partner<br />
22 January <strong>2008</strong>. On 1 January <strong>2008</strong>, <strong>ifb</strong> <strong>AG</strong> appointed Christian<br />
Moser to the Executive Board. He has been in<br />
an executive position at the <strong>ifb</strong> group since 2004 and a<br />
partner since 2007. The following were appointed as new<br />
associate partners of the <strong>ifb</strong> group: Andreas Fuchs,<br />
Andreas Gerdes, Thomas Kiefer, Dr. Sven Kilz, Dr. Kai-<br />
Oliver Klauck, Dr. Daniel Ruschmeier, Jürgen Salberg.<br />
Dr. Walter Herzog stands down from<br />
<strong>ifb</strong> <strong>AG</strong> Executive Board, but remains a partner<br />
12 February <strong>2008</strong>. Dr. Walter Herzog has stepped down as<br />
an <strong>ifb</strong> <strong>AG</strong> Executive Board member; however, he remains<br />
a partner and consultant of the <strong>ifb</strong> group. In future, <strong>ifb</strong><br />
<strong>AG</strong> Executive Board tasks will be carried out by Christian<br />
Moser and Claus Stegmann.<br />
SAP and Microsoft form global<br />
SOA network – <strong>ifb</strong> group is founding member<br />
30 April <strong>2008</strong>. In cooperation with 15 leading banks,<br />
consulting fi rms and software companies, SAP and Microsoft<br />
have established the Banking Industry Architecture<br />
Network (BIAN). The founding members also include the<br />
<strong>ifb</strong> group.<br />
<strong>ifb</strong> SparkassenDIALOG Special <strong>2008</strong> –<br />
Personnel management<br />
29 May <strong>2008</strong>. In addition to the annual <strong>ifb</strong> Sparkassen<br />
DIALOG event, an <strong>ifb</strong> SparkassenDIALOG special will also<br />
be held on 29 May <strong>2008</strong> in Cologne. This event is exclusively<br />
devoted to the theme of personnel management<br />
within the German Sparkassen-Finanzgruppe (Savings<br />
Banks Finance Group).<br />
<strong>ifb</strong> group holds ‘International Banking<br />
Conference for SAP Users‘ in Vienna<br />
3/4 June <strong>2008</strong>. Specialists and management members from<br />
banks all over the world meet to discuss their experience<br />
of bank management using ‘SAP for Banking‘. Speakers<br />
from international banks, SAP <strong>AG</strong> and the <strong>ifb</strong> group<br />
demonstrate how leading banks use the latest business<br />
and technical management methods with SAP systems.<br />
The conference tackles questions regarding ‘analytical<br />
banking‘ as well as ‘transactional banking‘.
<strong>ifb</strong> group expands its range of<br />
‘Business Intelligence‘ services<br />
5 June <strong>2008</strong>. <strong>ifb</strong> group has expanded its range of services<br />
in the area of ‘Business Intelligence‘ (BI) with the new<br />
service line ‘BI Technology‘. The tasks of the new service<br />
line encompass cross-sector consulting, reselling and<br />
implementation within the BI area.<br />
Horst Will celebrates 75th birthday –<br />
<strong>ifb</strong> group founder and Supervisory Board<br />
chairman<br />
6 June <strong>2008</strong>. Founder of the <strong>ifb</strong> group, Horst Will, has<br />
celebrated his 75th birthday. He has played a major role<br />
in successfully developing the <strong>ifb</strong> group ever since the<br />
company was established in 1989, including as chairman<br />
of the <strong>ifb</strong> <strong>AG</strong> Supervisory Board and the <strong>ifb</strong> International<br />
<strong>AG</strong> Administrative Board.<br />
<strong>ifb</strong>-OKULAR <strong>®</strong> ORM Software receives SAP<br />
certifi cation ‘Powered by SAP NetWeaver‘<br />
18 June <strong>2008</strong>. SAP has presented the consulting and software<br />
provider, <strong>ifb</strong> group, with the certifi cation ‘Powered<br />
by SAP NetWeaver‘ in respect of its <strong>ifb</strong>-OKULAR ORM<br />
5.1.3 software. As such, the <strong>ifb</strong> operational risk management<br />
software is integrable with the SAP technology<br />
platform NetWeaver.<br />
<strong>ifb</strong> group continues its dynamic growth –<br />
Turnover increases to 59 m Euro and the<br />
number of employees to 430<br />
20 June <strong>2008</strong>.. The consultancy and software supplier, <strong>ifb</strong><br />
group, is continuing its steady growth of recent years.<br />
As in the previous year, turnover rose by 23% in 2007 to<br />
59 m Euro. As the largest company in the <strong>ifb</strong> group, <strong>ifb</strong><br />
<strong>AG</strong> recorded a turnover of 46 m Euro and has therefore<br />
grown by around 10%. The number of employees in the<br />
<strong>ifb</strong> group also rose considerably from 350 to around 430<br />
employees (status at the end of 2007).<br />
<strong>ifb</strong> group establishes new companies in Slovakia,<br />
the Czech Republic, Hungary and Poland<br />
23 June <strong>2008</strong>. <strong>ifb</strong> group is signifi cantly expanding its<br />
business in Eastern Europe. In future, the consulting and<br />
service provider will also be represented through its own<br />
companies in Slovakia, the Czech Republic, Hungary and<br />
Poland.<br />
<strong>ifb</strong> group now also represented in Uruguay<br />
through the consulting and software company,<br />
2 Innovate IT<br />
25 June <strong>2008</strong>. <strong>ifb</strong> group has also expanded its business<br />
in Latin America in the form of consulting and software<br />
company 2 Innovate IT. Domiciled in Montevideo<br />
(Uruguay), 2 Innovate IT also has a subsidiary in Miami<br />
(USA) and will work in close cooperation with <strong>ifb</strong> Americas<br />
Inc. (also in Miami).<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 51
Insight Selected projects<br />
Selected projects<br />
Banking Aachener Bausparkasse <strong>AG</strong>: Introduction of interest rate book management with <strong>ifb</strong>-OKULAR <strong>®</strong><br />
ZIRIS Allgemeines Rechenzentrum GmbH Innsbruck: SAP P&L simulation ALTE LEIPZIGER Bauspar<br />
<strong>AG</strong>: Introduction of interest rate book management with <strong>ifb</strong>-OKULAR <strong>®</strong> ZIRIS Aozora Bank: J-GAAP implementation<br />
AFI 5.0 sub-ledger scenario AXG Investmentbank <strong>AG</strong>: Expansion of licence to deposit bank Bankhaus Lud-<br />
wig Sperrer KG: Interest rate book management with <strong>ifb</strong>-OKULAR <strong>®</strong> ZIRIS Bausparkasse Mainz <strong>AG</strong>: Introduction<br />
of interest rate book management with <strong>ifb</strong>-OKULAR <strong>®</strong> ZIRIS Bayerische Hypo- und Vereinsbank <strong>AG</strong>: SAP Bank<br />
Analyzer – introduction of Strategy Analyzer BHW Holding <strong>AG</strong>: Group reporting within the scope of integration<br />
Commerzbank <strong>AG</strong>: Analyses in the areas global trading data pool, fi nancial accounting optimisation, support in imple-<br />
menting a new hedge accounting strategy COREALCREDIT BANK <strong>AG</strong>: IFRS with SAP Bank Analyzer, introduction<br />
of IFRS, SEM Credit Limit, SEM Profi t Analyzer, SEM Risk/Strategy Analyzer Deutsche Bausparkasse Badenia <strong>AG</strong>:<br />
Introduction of Basel II computation model with <strong>ifb</strong>-OKULAR <strong>®</strong> SOLVARIS Deutsche Postbank <strong>AG</strong>: Implementation<br />
of portfolio impairment in accordance with IFRS European Bank for Reconstruction and Development:<br />
Implementation of IFRS solution in SAP Bank Analyzer FIDUCIA IT <strong>AG</strong>: Development of controlling computation<br />
model, development of a software module for productivity assessment, joint implementation and rollout of <strong>ifb</strong>-OKULAR <strong>®</strong><br />
ORM for the evaluation and management of operational risks, VR-Control projects Frankfurter Volksbank eG:<br />
VR-Control projects GAD eG: Implementation of a Basel II computation model, VR-Control projects Hamburger<br />
Sparkasse <strong>AG</strong>: Implementation of a hedge management system, IFRS implementation HSH Nordbank <strong>AG</strong>: Ac-<br />
celeration of IFRS fi nancial statement to establish capital market viability, establishment of reporting within the scope of<br />
large exposure regulations (GroMiKV), professional and technical support during introduction of IAS/IFRS, implementation<br />
of requirements for Basel II/Solvency Act, process support in integrating fi nancial innovations (‘New products , new markets‘<br />
process) HUK-COBURG-Bausparkasse <strong>AG</strong>: Introduction of interest rate book management with <strong>ifb</strong>-OKULAR <strong>®</strong><br />
ZIRIS IKB Deutsche Industriebank <strong>AG</strong>: Basel II, implementation of IAS Bank Analyzer Kreissparkasse<br />
Böblingen: Treasury Kreissparkasse Herzogtum Lauenburg: Sales management with <strong>ifb</strong>-OKULAR <strong>®</strong><br />
Kreissparkasse Köln: Implementation of <strong>ifb</strong>-OKULAR <strong>®</strong> IMPAIRMENT MAN<strong>AG</strong>ER Landesbausparkasse Berlin-<br />
Hannover: Introduction of overall bank management and total bank reporting LBS Hessen-Thüringen: Interest<br />
rate book management Münchener Hypothekenbank eG: Productivity support Nationwide Building Society:<br />
Implementation of SAP Banking process platform NRW.BANK: Introduction of SAP Credit Risk Analyzer to cover<br />
the Solvency Act (SolvV), introduction of RR Analyzer to cover the new large exposure regulations (GroMiKV) and statistic<br />
reporting, implementation of accounting according to German Commercial Code (HGB) on the basis of SAP Balance Analyzer<br />
NORD/LB: Return management and hedge simulation using <strong>ifb</strong>-OKULAR <strong>®</strong> , commercial law risk report and Basel II,<br />
management and specialist support for specialist IFRS project Quelle Bauspar <strong>AG</strong>: Introduction of interest rate book<br />
management with <strong>ifb</strong>-OKULAR <strong>®</strong> ZIRIS SAP Deutschland <strong>AG</strong> & Co. KG: Special expertise partner, curriculum partnership<br />
for analytical banking, development of multi-currency accounting, integrated fi nancial and management accounting,<br />
conception and development of hedge management, assistance with Industry Value Network for Banks, profi tability<br />
analysis, roll-in and test support for Basel II solution, SAP Bank Analyzer – Accounting for Financial Instruments, specifi cation<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08<br />
52
of credit risk services within the scope of ESOA, support for Basel II,<br />
support for business content of SAP Bank Analyzer 6.0, localisation<br />
support for Basel II, support of roll-in of SAP Bank Analyzer 6.0, support<br />
services in FS-PP, solution management support Sparkasse<br />
KölnBonn: Risk-based credit auditing, support for introduction<br />
of IFRS Sparkasse Vest-Recklinghausen: Potential-based<br />
sales planning Standard Bank South Africa: SAP Bank Analyzer<br />
– Accounting for Financial Instruments (proof of concept), integrated<br />
fi nancial and management accounting (proof of concept)<br />
Toyota Financial Services: Integrated overall bank management with<br />
<strong>ifb</strong>-OKULAR <strong>®</strong> Vereinsbank Victoria Bauspar <strong>AG</strong>: Introduction<br />
of interest rate book management with <strong>ifb</strong>-OKULAR <strong>®</strong> ZIRIS <strong>®</strong><br />
Volksbank Bielefeld eG: VR-Control projects Volksbank<br />
eG Konstanz: VR-Control projects Volksbank Gelsenkirchen-Buer<br />
eG: VR-Control projects Volksbank Koblenz-<br />
Mittelrhein eG: VR-Control projects Volksbank Paderborn<br />
eG: VR-Control projects Volksbank Rhein-Neckar<br />
eG: Introduction of overall bank management according to VR-Control,<br />
VR-Control projects Westdeutsche ImmobilienBank <strong>AG</strong>:<br />
Default risk limitation, Basel II, external price calculator, treasury<br />
return Wüstenrot Bank <strong>AG</strong> Pfandbriefbank: Overall bank<br />
management Wüstenrot Bausparkasse <strong>AG</strong>: overall bank<br />
management Insurance SparkassenVersicherung<br />
Holding <strong>AG</strong>: IFRS implementation Versicherungskammer<br />
Bayern: IFRS implementation Vorsorge Lebensversicherung<br />
<strong>AG</strong>: SAP coaching support Wüstenrot & Württembergische<br />
<strong>AG</strong>: Risk-bearing capability Corporates E.ON<br />
Portfolio Solution GmbH: Support in the planning and implementation<br />
process for licensing through the Federal Financial Supervisory<br />
Authority (BaFin) E.ON Sales & Trading GmbH: Support<br />
for risk management and compliance G<strong>AG</strong> Immobilien <strong>AG</strong>:<br />
Risk/opportunity management Hamburg Port Authority:<br />
Risk/opportunity management Koelnmesse: Risk/opportunity<br />
management Stadtwerke Lübeck GmbH: Risk/opportunity<br />
management Vaillant Group: Risk/opportunity management<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 53
<strong>ifb</strong> <strong>Annual</strong> 07/08 54<br />
Publisher Details Milestones<br />
Corporates<br />
published by <strong>ifb</strong> group editorial services/art direction/layout/photography/production <strong>ifb</strong> <strong>AG</strong><br />
text context editorial service, cologne and <strong>ifb</strong> <strong>AG</strong>, cologne translation into english Transprojekt GmbH, Bonn<br />
proofreading Barbara Möller, Redaktionsservice, Trebur print Siebel Druck & Grafi k, Lindlar
1989 Founding of financial management company ‘<strong>ifb</strong> – Institut für betriebswirtschaftliche Beratung der Kreditwirt-<br />
schaft, Horst Will & Partner‘ 1990 Launch of in-house software development with the interest management tool ‘Zins-<br />
management‘ 1995 Beginning of partnership with SAP <strong>AG</strong> 1998 Integration of software products ZIRIS <strong>®</strong> , ZIABRIS <strong>®</strong> ,<br />
MARGE and CBS <strong>®</strong> into <strong>ifb</strong>-OKULAR <strong>®</strong> suite 2001 Transformation into ‘<strong>ifb</strong> <strong>AG</strong>‘, with company founder Horst Will taking up<br />
the post of Chairman of the Supervisory Board and Dr. Walter Herzog and Claus Stegmann as members of the Executive Board<br />
2001 Expansion of portfolio to include a range of consulting services and software solutions for the insurance industry<br />
2001 Data-processing cooperative <strong>AG</strong>R opts to install <strong>ifb</strong>-OKULAR <strong>®</strong> throughout Germany as part of the IT project imple-<br />
menting VR-Control 2004 Expansion of business portfolio to include financial management services 2004 Commence-<br />
ment of business activities of <strong>ifb</strong> International <strong>AG</strong> and its subsidiaries <strong>ifb</strong> Suisse <strong>AG</strong> and <strong>ifb</strong> Asia Ltd. 2005 Development<br />
of <strong>ifb</strong> group international business 2005 <strong>ifb</strong>-OKULAR <strong>®</strong> 5.0 with operational risk management 2006 Founding of<br />
consulting and software company <strong>ifb</strong> Lux S.A. and auditing company <strong>ifb</strong> Lux-Audit S.à r.l. in Luxembourg 2007 Founding<br />
of auditing company <strong>ifb</strong> Treuhand <strong>AG</strong> Wirtschaftsprüfungsgesellschaft in Cologne (Germany) 2007 Founding of consult-<br />
ing and software companies <strong>ifb</strong> Americas Inc. in Miami (USA) and <strong>ifb</strong> Austria <strong>AG</strong> in Vienna (Austria) 2007 Founding of<br />
consulting and software company <strong>ifb</strong> Slovakia s.r.o. in Bratislava (Slovakia) 2007 Founding of consulting and software<br />
company <strong>ifb</strong> France s.a.s. in Neuilly-sur-Seine (France) 2007 Founding of technology consulting company FS Technologie<br />
in Wrocław (Poland) <strong>2008</strong> Dr. Walter Herzog steps down as <strong>ifb</strong> <strong>AG</strong> Executive Board member <strong>2008</strong> Christian Moser<br />
appointed <strong>ifb</strong> <strong>AG</strong> Executive Board member <strong>2008</strong> Expansion of Business Intelligence technology service range <strong>2008</strong><br />
Helmut Späth elected chairman and Horst Will honorary chairman of the <strong>ifb</strong> <strong>AG</strong> Supervisory Board<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08 55
<strong>ifb</strong>-group.com<br />
<strong>ifb</strong> <strong>AG</strong><br />
Neumarkt-Galerie Neumarkt 2<br />
50667 Cologne, Germany<br />
Tel +49 221 92 18 41-0<br />
Fax +49 221 92 18 41-300<br />
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Miami, FL 33126, USA<br />
Tel +1 610 616 39 01<br />
Fax +1 305 768 04 44<br />
<strong>ifb</strong> Asia<br />
consulting.software.results<br />
(Beijing) Co., Ltd.<br />
Room 318, Moma Tower<br />
Chao Yang Bei Road No.199<br />
Chaoyang District, Beijing, 100026<br />
P.R. China<br />
Tel +86 135 012 298 35<br />
<strong>ifb</strong> Austria <strong>AG</strong><br />
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1060 Vienna, Austria<br />
Tel +43 1 581 03 22 0<br />
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<strong>ifb</strong> Czech Republic s.r.o.<br />
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Tel +420 2 71 73 51 03<br />
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<strong>ifb</strong> Suisse <strong>AG</strong><br />
Thurgauerstrasse 54<br />
8050 Zürich, Switzerland<br />
Tel +41 44 318 70 00<br />
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2 Innovate IT<br />
Paraguay 1478, Piso 2<br />
Montevideo, C.P. 11100, Uruguay<br />
Tel +5982 902 50 32<br />
FS Technology Sp. z o.o.<br />
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53-009 Wrocław, Poland<br />
Tel +48 71 750 40 50<br />
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<strong>ifb</strong> group network companies<br />
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Tel +49 221 355 85 55-0<br />
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info@<strong>ifb</strong>-group.com<br />
www.<strong>ifb</strong>-group.com<br />
<strong>ifb</strong> <strong>Annual</strong> 07/08