Deutsche Financial Adds Needed Insight
capital markets
RISK MANAGEMENT
Deutsche Financial Adds Needed Insight
Building an effective risk management solution can sometimes feel like putting together a large puzzle. The proper systems and services, usually a varying combination of vendor-driven and internally developed applications, have to be weighed carefully and assembled just right. And, no matter how frustrating things may get, these are projects you just can’t put away for a rainy day.
St. Louis, Mo.-based Deutsche Financial Services (DFS) recently found an important piece in a restructuring project for its own risk management puzzle. It came in the form of BancWare’s Insight loan portfolio analysis tool. DFS, the U.S. financial services financing subsidiary of German powerhouse Deutsche Bank, will make use of Insight to support its estimated $10 billion loan portfolio.
"We’re turning to BancWare’s Insight to help us get control over the data that we are getting from our loan systems to help us develop reports, and then feed that data into our risk models," says Charles Franckle, vice president and director of treasury risk management for DFS. Franckle says it was Insight’s core data-capturing capabilities that primarily drove DFS’ decision.
The Insight system is a set of applications running under Microsoft Windows NT designed to capture and integrate fundamental data from a variety of sources—including a company’s existing data warehouse. The data is then used for detailed analysis and forecasting by using a series of financial algorithms.
"DFS is going to use Insight to clean, scrub and prepare their data for analytical purposes both for market valuation as well as for income simulation purposes," says a BancWare representative. "It will be attached to all of their systems so data will flow through from their entire balance sheet. And, in addition to preparing the data, they will also use Insight to provide transaction level reporting capabilities."
Having inked the deal with BancWare in early May, Franckle plans to have Insight in full production within the next two months. The Deutsche Bank subsidiary supports its $10 billion portfolio with a variety of internally developed databases, as well as various proprietary management and accounting systems. "The idea is that this will help us get all of the data from those systems on an automated basis and be able to use it for analysis," says Franckle.
Meanwhile, says Franckle, DFS plans to not only link Insight to its inhouse systems, but also incorporate BancWare’s product into its new risk management scheme.
"We plan to use this as part of our risk management process, which we expect to have operational within the next two months," says Franckle. "It’s a standard risk management process where the first step is getting detailed data, developing the analytical models, in order to measure and manage our risk."
Previously, DFS used a collection of semi-automated internally developed risk management systems. Rapid growth over the last few years, swelling the firm’s loan portfolio to over $10 billion, required DFS to roll out a more robust risk management solution.
As part of this new risk management initiative at DFS, the firm plans to link Insight to Honolulu-based Kamkura’s market valuation model—also a newly adopted product. Aside from the incorporation of BancWare and Kamakura, DFS’s project is almost exclusively being developed inhouse. In fact, Franckle says initially, DFS planned to not use outside vendors at all. However once DFS officials had a chance to evaluate the two offerings, they decided against a long and costly internal development project.
"Given the resources that we have internally, and what we’re trying to do, we just thought, from a cost/benefit basis, that they provided us with a product we could really use," says Franckle.