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Axis Bank Kondor Global Risk Beyond regulation, an opportunity for growth
Company profile
Axis Bank is one of Indias top three private banks, created in 1994 as part of Indias opening up of itsbanking sector that for decades had been dominated by government banks. As an innovative, new-generation bank in India, Axis has expanded consistently at a rate higher than the industry average and currently has over 1400 branches, including seven overseas offices serving retail and corporate customers. Today Axis is growing at 3035% per annum, but with a state-of-the-art risk monitoring function its business could push itself tohigher annual growth rates. It offers a wide range ofservices and products ranging from core banking products, treasury products like money market andFX, fixed income products (including corporate Indian bonds), and derivatives.
been accounting-oriented, designed to meet financial controls, rather than address risk management needs. As a result, Indian banks flagship systems have been focused on core banking functions which can capture the trades and do static credit checks, but lack comprehensive and dynamic market risk functionality. At Axis, this was addressed by building internal market risk functionality as an add-on to multiple in-house trading systems, typically involving more manual and less of STP type computation of risk numbers. The limitations of fragmented, manual computation precludes enablements namely dynamic stresstesting and Management Information System, flexible limits definitions and back testing all parts of the risk arsenal needed by todays risk analysts to keep the pace with the speed of business. Pravat Dash, Head of Market Risk Management at Axis Bank, explained, We were looking for an enterprise wide market risk system capable of integrating with multiple trading systems and consolidating all economic position information in a single place that could drive dynamic risk engines, define limits and support drill-down. Importantly, all this functionality needed to be performed on atimely basis and in an STP, automated process thatwould significantly cut the extent of effort needed to obtain meaningful risk assessments. Theconsolidation of positions in a single system separate from pre-existing trading systems was an important requirement, both to ensure enterprisewide consistency by harmonizing the data, as well as to ensure timely analysis by virtue of not having to constantly go back to source systems. After looking at a number of vendors and shortlisting four, Axis Bank decided to use the Kondor Global Risk system from Misys.
Case study
Axis Bank Kondor Global Risk Beyond regulation, an opportunity for growth
The solution
The Kondor Global Risk (KGR) system, conceived from scratch as an enterprise risk system that canexist independently of any trading system (including trading systems from Misys like Kondor+), was a good fit to Axis Banks needs. Dash said, KGR provides a good platform for the banks requirements in VaR, limits, and compliance with our internal model requirements. It provides stress testing and back testing, as well as responsive risk dashboards to ensure risk transparency at any level of the organization. Beyond the functional and technological benefits, another important element in Axis decision was thecomprehensive nature of Misys delivery and support organization, and in particular the fact that it has a local support team in India that has previous experience in implementing VaR systems from Misys at six other Indian banks. This was important to Axisbecause the Indian market has a number of peculiarities (for instance, corporate bonds in India require special treatment). The project also required the integration of numerous front office systems from different vendors. The local Misys team had theskills to ensure that project risk would be kept toa minimum.
Key benefits
The new system is expected to have a significant impact in a number of areas:
Can support growth: Effectively support AxisBank in its high growth momentum byenhancing effectiveness of market risk measurement, monitoring and control related totreasury products and target a stable businessand income growth rate. Regulatory-ready: Prepare Axis Bank to complywith IM regulations when they decide onmigration. Less manual processes: Significantly reduce themanual effort involved in analytics and Management Information System, thus making the risk management process more accurate andtimely. Source of insight: Provide good visibility on therisk dynamics faced by Axis Bank through the dashboard for its large portfolio encompassing around 15 banking products and an array of derivative products.
In total, there will be three core user groupswho will benefit from the new marketrisk system:
Users focused on producing reports, both for internal use and for regulators Risk analysts for modeling risk and conducting drill-down analysis Users who will do some integration with the current credit risk system
The project has been structured around threephases, delivered over 2011/2012:
Position consolidation and implementation of market limits to support pricing in client front office applications Implementation of historical simulation for marketrisk VaR Implementation of Monte Carlo simulation formarket risk VaR
Kondor Global Risk provides responsive risk dashboards to ensure risk transparency at any level of the organization.
Pravat Dash Head of Market Risk Management, Axis Bank
Case study
ABOUT MISYS Misys is at the forefront of the nancial software industry, providing the broadest portfolio of banking, treasury, trading and risk solutions available on the market. With 1,800 customers in 120 countries our team of domain experts and partners have an unparalleled ability to address industry requirements at both a global and local level.
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Misys was formed by the merger of Misys with Turaz, which includes the award-winning Kondor+ product line. Combined they are able to address all customer requirements across both the banking and trading book businesses. Misys is the trusted partner that nancial services organisations turn to for help solving their most complex problems. Find out more at www.misys.com
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