Cognos, an IBM (NYSE:IBM) company and a world leader in business intelligence and performance management, today unveiled new analytic software designed to provide retail banks with complete access to accurate, timely and transparent credit risk information across their loan portfolios.
The many challenges facing the financial services industry today can be attributed to poor credit risk decision-making. While risk management is a key component of most banks, in many cases, critical risk information is siloed and locked up in disparate data sources, making it difficult for banks to gain a 360 degree view of enterprise risk information in order to properly forecast risk exposure and monitor the day-to-day performance of current loan portfolios.
IBM Cognos 8 Banking Risk Performance - Credit Risk is a packaged business intelligence (BI) application that gives bank executives and risk managers an immediate, up-to-date and comprehensive view of their credit portfolio across products, geographies and business units. Built on an open, services-oriented architecture platform, the new solution plugs into an organization's existing technology environment, letting users easily tap into their credit risk data housed in financial, core lending and other administrative systems to gain an accurate, up-to-date understanding of loan performance and its current and long-term effect on profitability.
"Credit risk management in the banking industry has become increasingly complex due to financial deregulation, weakness in the economy, financial product complexity and the recent and unprecedented turmoil in the financial services industry," said Craig Focardi, research area director for TowerGroup. "In addition to strengthening credit risk policies and processes, it has become a business imperative for banks to invest in systems and analytic applications that can harness their disparate risk data, and provide the ability to assess risk scenarios in real time to ensure ongoing alignment with policy and achieve profitability goals."
Leveraging the IBM Banking Data Warehouse, or the bank's existing credit risk warehouse, the new analytics application offers users a single, standardized source of enterprise-wide credit risk information from which pre-built dashboards and packaged reports can provide instant visibility into five key analytic areas:
- Originations - to assess the volume and characteristics of new loan originations, such as credit scores and loan-to-value calculations across the portfolio
- Front-end Performance - to better gauge delinquencies, 2+ delinquencies, delinquency roll-rates, and vintage information
- Back-end Performance - to quantify gross and net charge-offs, repossessions, foreclosures, and bankruptcies
- Financial Oversight and Profitability - to measure risk-adjusted return on capital (RAROC), net interest margin, and forecast vs. actual comparisons for metrics including receivables, delinquencies, and charge-offs
- Basel II - to facilitate compliance reporting on key Basel II metrics such as Probability of Default, Loss Given Default, Expected Loss, Exposure at Default, and Capital Ratios
For instance, using the application's delinquencies dashboard, a chief risk officer can instantly view the latest information on all enterprise-wide delinquencies that are two or more payments late, and identify which geographic regions and products - such as long-term, fixed mortgage loans - are causing issues. By consulting the originations dashboard, he can then determine if the bank is too heavily weighted in high-risk geographies or products, then take corrective measures moving forward, such as creating sales and marketing strategies that target different areas and emphasize other products.
"To the extent that an institution has a good understanding of its risks and exposures, it can be proactive in managing its loan portfolios," said Serge Couture, senior manager of business intelligence at Laurentian Bank of Canada. "By investing in systems, analytical tools, and sophisticated modeling techniques, retail banks can gain much needed context around their data - whether at a high-level portfolio ceiling view or a more detailed transaction-level analysis - to make the right decisions to protect themselves."
With the application's adaptable warehouse, users can quickly and easily create new reports that best reflect the unique way their organization operates. Reports can just as easily be modified to reflect sudden business changes, such as adding dimensions like new geographic regions, for use with new or existing data sources. All of this is done through a user-friendly interface and without the need to modify code, freeing up IT resources to focus on supporting the organization's broader information management strategy requirements.
Customers can also capitalize on the application's underlying IBM Cognos 8 platform to extend their information insights using IBM Cognos' rich spectrum of performance management capabilities - including analysis, scorecarding, and multi-dimensional planning - to drive greater business value.
"On-demand risk management is predicated on ensuring executives and managers are making the right decisions that are properly framed within the context of current and accurate risk metrics, such as risk concentrations and exposures," said Laurence Trigwell, associate vice-president of financial services at Cognos. "IBM Cognos 8 Banking Risk Performance - Credit Risk can arm executives and risk managers with the immediate insights they need to assess and monitor critical risk factors, adjust loan portfolios appropriately and ensure healthy, profitable lending operations."
IBM Cognos 8 Banking Risk Performance - Credit Risk is a core component within IBM's Financial Integrated Risk Management portfolio, which includes software and services that help financial services organizations break down the traditional silos between risk and finance reporting to drive more value from existing information assets and deliver a roadmap to enterprise risk management.