“High Performing Financial Institutions and the Keys to Success in an Uncertain Environment”

2 Presentation to the Caribbean Association of Indigenous Banks by Peter Hill, Oracle Financial Services Software “High Performing Financial Institutions and the Keys to Success in an uncertain Environment”  The liquidity crisis  Increasing scrutiny by regulators  The importance of bringing Risk and Finance into decision making We describe this as the ‘New Normal’

3 “New Normal” in Financial Services Transformation Unfolding Now Sound risk management must now be embedded in all decision making processes across the institution Risk and performance management, along with accounting functions, must naturally exist within a common decision making platform Compliance with advancing and more complex regulatory mandates will trigger a shift in focus from paper pushing/reporting driven efforts to competitive driver Capital adequacy and liquidity risk management will define an institutions’ ability to not only survive, but thrive, in the “New Normal” marketplace

4 “New Normal” in Financial Services This Transformation Means… Operational Risk must play a more prominent and integrated role at the top of the institution to identify, control and manage risk and performance issues Financial crime and compliance strategies are already moving from pure regulatory compliance plays to strategic with increased need for integrated with other risk systems CIOs must revisit the nature of supporting data warehouse architecture strategies as cross functional needs drive major change and restructuring Collection and distribution focused data strategies will transform into more purpose-built and end use case approaches

5 Ever-Changing Compliance is a Big Issue 6 © 2010 Oracle Corporation – Proprietary and Confidential

6 Banks Face Many Different Types of Risks Trading & Model Risks Business Continuity Legal Risks Outsourced and Supplier Risks Compliance Risks Financial Crime (AML, Fraud, Rogue Trading) Product Risks Market Risk IT Governance and Information Security Documentation Risks Reputational Risks Risks need to be identified and evaluated. What controls are in place? Do they work? What happens in stress scenarios? Credit Risk

7 Worst-Case Workshop Scenarios Identify, examine, and consider action about risks at a strategic level:  External threats e.g. competition, loss of key staff, weather issues, terrorism  Temporary issues e.g. loss of electricity, public transport, medical pandemic, IT or communication failure  Market disruption e.g. lack of liquidity, changes in economy Consider scenarios as: 1.Consider relevance and potential impact 2.Determine necessary action 3.Periodically review Record outcome of workshops : Use workshops and a moderator

8 ERM & Capital Adequacy Liquidity Risk Management 8

9 ERM & Capital Adequacy Enterprise Stress Testing 9

10 ERM & Capital Adequacy Risk Adjusted Performance Measurement 10

11 ERM & Capital Adequacy Risk Materiality Assessment 11

12 ERM & Capital Adequacy Capital Planning 12

13 A Strategic Approach to the Risk Analytical Challenge Begin with Firm Foundations v A Financial Services data model, an ‘intelligent’ infrastructure, and a BI reporting layer used to drive all of our risk analytical solutions representing a one-time investment. 13

A Strategic Approach to the Risk Analytical Challenge Then Add Applications as Required Unified Analytical Metadata FINANCIAL SERVICES ANALYTICAL APPLICATIONS DATA MODEL FINANCIAL SERVICES ANALYTICAL APPLICATIONS INFRASTRUCTURE FINANCIAL SERVICES BUSINESS INTELLIGENCE Data Sources Reports Alerts Dashboards Embedded Computations Common Tools Business Rules Stochastic Modeling Common Objects Common Dimensions Pre-Integrated/ Extensible High Volume Liquidity Risk Capital Adequacy Credit Risk Market Risk 14 Operational Risk etc. A one-time investment in analytical and reporting infrastructure that is leveraged by all analytical applications.

15 A “Joined Up” IT Strategy Potentially Allows: Stress testing of key risks Scenario analysis to see how ‘prepared’ the organisation is for the ‘unexpected’ event Satisfy regulators with comprehensive risk assessments across the enterprise Compliance risk is another type of operational risk Internal Audit are partners with Compliance Managers with Operational Risk Managers to ensure compliance with internal standards and external regulations Failure to comply with AML regulations adequately is a Compliance and Operational Risk Fraud and cyber crime are both growing threats This “New Normal” requires a state of ‘Analytical Transformation’

16 What this means: You don’t have to throw out your existing software It does mean you need to think whether or not you really have a ‘joined-up’ IT strategy capable of delivering a ‘joined-up’ risk view Oracle Financial Services Analytical Applications Infrastructure and the necessary applications to fill the gaps Import Data Financial data warehouse

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