Bank puts BI tools to work on market risk

Using technology tools to manage the risk in its financial markets operations was not the Commonwealth Bank's forte, until it streamlined its previously cumbersome reporting process.

The bank deployed an integrated business intelligence tool worth $70,000 to cut the number of manual processes and speed up the information flow.

The Commonwealth Bank of Australia's financial markets operations manages the back end processing of CBA's e-commerce transactions in its core financial market areas. Those areas include cash, commercial bills and fixed interest, derivatives, foreign exchange, futures, and the Asian, New York and London financial markets.

To manage the risk in these operations, the bank had in place some 414 key performance indicators (KPIs) across nine business units -- a tedious reporting process, which took three weeks to collate data, according to CBA executive general manager of financial market operations Michael Mynett. Typical KPIs used, he said, were dealer errors on options, rollovers, new deals, system downtime or confirmations outstanding.

Driving the KPI collection and entry process was a web of communication channels including e-mail, telephone and verbal exchanges, hardcopy reports, more than 100 Excel spreadsheets of data, and intranet information for managers and staff reference.

Highlighting the importance of KPIs to determine and mitigate risk in its financial markets business, Mynett said: "We need to be able to control risks like transactional risks in accounts; we need to know how long any of our systems are going to be down and when.

"If our foreign exchange system goes down for 20 minutes, we're stuffed."

The manually-intensive process of setting and updating KPIs needed an overhaul. It was flawed by little ownership from business units and was error-prone as one person processed information on KPIs, he said.

The bank consulted Arthur Andersen to audit the existing system, after which the firm recommended an integrated software solution to streamline the process of reporting on risk.

"Andersen found that while we had the data to establish KPIs, the KPIs remained stagnant, because they were not useful to all business units at all times. Nor could changes to KPIs by different users be viewed efficiently in real-time," Mynett said.

"Overall, we wanted to reduce the number of manual KPI processes, improve the timeliness of the reporting process, have more analytical, granular information at our hands, decrease error rates, and have a stable system that was easy to maintain."

CBA settled on a business intelligence (BI) solution from German-based software and services company MIS AG . The bank deployed MIS onVision, and intranet product for data entry and reporting, and MIS Alea, an Excel integration tool for KPI analysis, reporting, data management and system management.

Individual business units can import and update their own KPI data, and being a browser-based system, it provides a custom-view of individual reports on the financial markets group's intranet sites, Mynett said.

Also, the new system produced a two-year forecast on KPI results, giving Mynett's group a better overview of operational performance trends.

"It's helped us get better control of how we manage operational risk," he said.

Within a month of the deploying the BI system (a two-month project), efficiency gains through enhanced productivity and quality of data became clear, Mynett said.

The improved quality of KPI data reduced reporting error rates and needed fewer user queries. It also cut the time to update individual business units' KPIs from 10 days to 10 minutes.

Because the tool was also a flexible Web-based system, it gave both desktop and laptop users ease of use. Overall, business units gained more ownership of essential business information, Mynett said.

The bank is also considering enhancing the system's scope with budgeting, forecasting, unit costing and other management reporting add-ons and reporting timetables for daily, weekly, monthly and yearly KPI analysis.

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