Risk Management and Basel II: Comparing the Financial and Credit Risk Solution Vendors

by Cubillas Ding, February 22, 2006

Abstract

London, United Kingdom February 22, 2006

Risk Management and the Basel II Game: Comparing the Financial and Credit Risk Solution Vendors

Celent urges institutions in the market for financial/credit risk systems to thoroughly assess their needs against the broad spectrum of available solutions and services.

Risk management budgets are growing in reaction to mounting pressure to integrate financial risk management practices. As a result, financial institutions have more money to spend on risk management solutions. In addition to the main elements of a Basel II solution (like capital calculators, reporting, data warehouses, and data management tools), institutions will place greater emphasis on replacing "peripheral" applications for activities in areas such as asset/liability management, limits management, and credit scoring.

In a new report, , Celent assesses offerings from seven vendors. The report examines the state of the market for Basel solutions and the innovative vendors that are helping institutions meet Basel II requirements. The report also examines the lessons learned from the first-wave institutions that have purchased Basel II solutions.

There are several vendors offering financial/credit risk and Basel solutions from diverse backgrounds. Some vendors are "new" to risk management, while others have functionality covering multiple areas, which can sometimes make the market for solutions confusing.

"Vendor and solution characteristics vary significantly," says Cubillas Ding, Celent analyst and author of the report. "Given the substantial investments required of these projects, there is a stronger drive for financial institutions, especially for those in non-mandatory jurisdictions outside Europe, to better align risk management ambitions, application functionalities, technology architecture requirements, and vendor capability in various jurisdictions and business lines," he adds.

"With the vendor solutions available today, financial institutions have a range of options from selecting best-in-class components to complement existing functionality, as well as to form closer alliances with their vendors for Basel II compliance development and management," adds Lauren Bender, Celent analyst and co-author of this report.

Following the Celent report, Risk Management and the Basel II Game: Market Updates at Halftime, this new report focuses on the technology angle of Basel II solutions. It is intended to be a preliminary guide for institutions planning initiatives and evaluating vendors to prepare for the new Basel regime. The vendors analysed in detail include: Algorithmics, Fermat, i-flex Reveleus, Misys Almonde, SAP, SAS, and SunGard.

The 68-page report contains 27 figures and 14 tables.

A table of contents is available online.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

London, United Kingdom February 22, 2006

Risk Management and the Basel II Game: Comparing the Financial and Credit Risk Solution Vendors

 

Executive Summary 3
Introduction 5
Business and Technology Trends 6
  Basel II Adoption 6
  Key Issues - Mandatory Banks 8
  Key Issues - Non-Mandatory Banks 10
  Technology Imperatives 11
Institutions' Decision-Making 14
  A Strategic Decision 14
  Decision Making Differs By Geography 14
  Different Approaches to Risk Models 15
Basel II & Credit Risk Management 16
  Architecture Overview 16
  Risk Management & Basel II Components 17
  Peripheral Applications & Ecosystems 18
Vendor Ranking Methodology 20
Vendor Landscape & Profiles 22
  Algorithmics 24
  Fermat 29
  i-flex/Reveleus 32
  Misys 37
  SAP 41
  SAS Institute 45
  SunGard 49
Vendor Comparisons 53
  Pricing Comparisons 53
  Maintenance & Support 54
  Solution Positioning & Customer Base 55
  Clients by Region 55
  Clients by Institution Tier 57
  Clients by Share of Assets 58
  Number of Client Home Jurisdictions 60
  Vendor Rankings 61
Lessons & Considerations For Solution Selection 64
Conclusion 66

 

Sign in to download reports and access personalized information