Information Technology Trend in Development Banks

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Information Technology Trend  in Development
Banks
S.P.Sathyanarayanan, Sathya_narayanan_at_satyam.com
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Prelude

• The dramatic events ushering in the new
  centuryfrom globalization and a final, major
  wave of consolidation to regulatory changes and
  technology breakthroughsare compelling
  development banksDB to turn their focus toward
  efficiency and country relationship
  development.

Goliath Industry and Market Reports on Bank
Systems and Technology
3
Agenda

• Is real IT transformation likely to take place?
• Drivers to IT transformation
• Challenges Faced By Development Banks DB
• Advantage IT
• Plan for 21st Century IT Transformation
• Need of the Hour
• Identify the IT Role
• Hot Solutions for DBs
• e-Loan System
• Measurement and Management of Credit Risk
• RISK management solution Key business
  challenges
• Risk Management System
• Loan Systems High Level Functional Architecture
• Risk Management Key Solution Areas
• ODS Overview
• Advantage ODC
• Takeaways

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Is real IT transformation likely to take place?

• Three converging forces appear to make it
  unavoidable
• DBs spreading across geographies
• Financial transactions are commoditized
• Regulatory demands are unprecedented.

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Drivers to IT transformation

• The next 10 years will be defined by
• Accelerated expansion
• Process efficiency
• Greater Country sophistication
• More intense regulatory demands
• Opening up markets in existing and new member
  countries

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Challenges Faced By Development Banks

• DBs require real time system control on their
  operations
• DBs are unable to effectively track the
  development results
• The credibility of the financial reports becomes
  questionable
• Systematic Development Bank-wide management of
  data
• Risk measurement and management is becoming
  increasingly complex

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Advantage IT

• An effective IT Solution provide
• Operational effectiveness, internal efficiency
• Collaborative tools to help create, cultivate,
  and disseminate knowledge.
• Accessibility to data, information, and
  knowledge.
• The ability to easily search across and retrieve
  relevant information
• A project management system based on complete
  project lifecycle
• A resource management system which improve
  linkages

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Plan for 21st Century IT Transformation

• Focus on improving the internal efficiency and
  Country centricity
• Go horizontal
• Make the transition from banking operations in
  silos to an integrated organization.
• Balance objectives in IT strategy
• Balance the use of technology resources to
  support revenue growth
• Focus on governance
• IT to align with business strategy to improve
  returns on IT spending.
• Strategies addressing enterprise architecture,
  process automation and member analytics

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Need of the Hour

• The information systems and technology
  infrastructure must be improved to
• support the results-based agenda and
• Align the systems with the new organizational
  structure.
• And to support DBs three major information
  systems initiatives
• Risk Management
• Project processing and portfolio management
• Program resource management

• Latest Facts
• World Bank IT strategy took the approach of
  building up integrated systems for sharing of
  information with member countries
• IFC has provided the user interfaces to access
  existing information, while gradually replacing
  the older mainframe systems
• IDB has developed facilities using portal
  technology to provide access to many disparate
  systems .
• IADB is planning for implementation of
  Integrated IT Roadmap to synchronizes their ORG
  structure
• ADBs initial portal applications are designed
  to provide access to knowledge management
  applications
• Source- ADBs information Technology Strategy and
  Capital Expenditure Requirements 20042009 and
• IADB website

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Identify the IT Role

• IT enhances the capacity to review project
  processing and portfolio performance
• IT monitors performance against Millennium
  Development Goals
• IT facilitate tracking of activities and
  investments under development Initiatives
• IT systems provide the tools to report on project
  performance at each stage
• IT supports improved planning, management, and
  reporting on resource management
• IT supports documentation on study reports for
  evaluation and record lessons learned

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Hot Solutions for DBs

• A comprehensive solution should synchronize with
  business operations.
• Some of the latest solutions are
• Lending Solutions with an eye and ear to the
  ground
• Effective Credit Risk Management solution
• A comprehensive IFRS solution
• An effective development outcome tracking system
• Creation of Central Repository -Operational Data
  Store(ODS)
• Setting up of an extension of DBs IT Department
  in a cost effective professional
  atmosphere-Offshore Development Centers(ODC)

Source-IFC Capital Budget 2008
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e-Loan System
e-Disbursements
e-Documents
e-Billing
e-Payments
Integrated Loan Administration Platform
Loan Administration Database
Client Connection
Loan WEB, Loan Tracking System,
Loan Administration System LAS
Loan Data Warehouse
Loan Database
Other Systems
Loan Kiosk
LAS WEB, LTS,
Loan System
Financial Database
Controllers Data Warehouse
Loan Database
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Measurement and Management of Credit Risk
Why Manage Credit Risk ?

• Increase shareholder value
• Value creation
• Value preservation
• Capital optimization
• Instill confidence in the market place
• Alleviate regulatory constraints and distortions
  thereof

Credit risk management System Business
functions

• Derive risk measures and analytic inputs
• Estimate capital requirements
• Calculate risk-adjusted performance
• Forecast financial statements
• Analyze current and future exposure vs. limits,
• Calibrate and implement loan pricing model,
• Data Analysis and Reporting

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RISK management solution Key business challenges

• Risk measurement and management is increasingly
  getting complex
• Analysts need to spend time on risk analysis
• Disparate information limits the ability to
  perform an integrated credit risk analysis
• Limited flexibility to query, analyze and view
  risk data

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Risk Management System

• A typical Risk Management System meets the
  following requirements
• Provides for measurement of expected and
  unexpected losses, economic capital and an
  overall loss/change in value distribution
• Allows for performance measurement, risk based
  pricing, risk based limit setting.
• Covers loans, quasi-equity loans, equities,
  guarantees and structured assets and investments.
• Captures the impact of borrower/country ratings,
  product rating (LGD), exposure at default and
  industry/regional correlations.
• Attributes capital to the individual
  asset/investment level and combinations of
  investments

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Loan Systems High Level Functional Architecture
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Risk Management Key Solution Areas
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ODS Overview

• ODS is a central repository for corporate-wide
  data sharing
• Data from transaction systems is loaded in the
  ODS
• Stores historic data from transaction systems
• Provides view for other systems for their central
  reference
• ODS-design establish an efficient mechanism to
  store and retrieve valuable business information.

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Advantage ODC

• Infrastructure, Security as per clients Office
  Standards
• Savings in capital expenditure
• Retention of Knowledge - Business and Processes
• Accountability for Productivity and Quality of
  Deliverables
• Resources 100 dedicated to Program at a blended
  rate
• ODC operating in a different time zone speed up
  development time
• Flexible Pricing model

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Takeaways

• Information on how IT mitigate DBs business
  challenges
• The universal high level IT roadmap
• Information on comprehensive IT Strategy
• Sharing of IT experience in developing solutions
  for Development Banks

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THANKS
ADFIM ADFIAP CIPE AND PARTICIPANTS
Contact Details Sathya_narayanan_at_satyam.com Georg
e_john_at_satyam.com Satyam Computer Services
Limited Global Solution Centre, Block 3517,Jalan
Teknokrat 5, 63000 Cyberjaya Selangor,Malaysia. Te
l012-2846943