CLOUD-BASED MANAGED SERVICES IN BANKING. Matthew Walker

Transcription

1 CLOUD-BASED MANAGED SERVICES IN BANKING Matthew Walker

2 01 AGENDA 1. The fascination of portmanteaus 2. Cloud computing 3. As a service at your service 4. Managed services 5. An IFRS 9 managed service case study 6. Benefits and practical considerations 7. IFRS 9 in Africa 8. Conclusion PG 1

3 02 THE FASCINATION OF PORTMANTEAUS FINTECH Technologically enabled financial innovation that could result in new business models, applications, processes, or products with an associated material effect on financial markets and institutions and the provision of financial services. REGTECH Technological innovation that assists organisations with regulatory compliance and with managing risk more effectively and efficiently. PG 2

4 03 THE FASCINATION OF PORTMANTEAUS REGTECH OFFERS: Agility Speed Integration Analytics We are drowning in information, while starving for wisdom Edward Wilson In 2014 banks in Europe spent c. 55 billion on information technology Only 9 billion was spent on new systems REGTECH WORKS FOR: MI tools, health check tools, transaction reporting tools, regulatory reporting tools Data warehousing PG 3

5 04 THE FASCINATION OF PORTMANTEAUS BIGTECH PG 4

6 05 CLOUD COMPUTING Accessing a computer that doesn't belong to you Storing or processing Business or personal use Usually subscription based Multi-billion dollar industry PG 5

7 06 CLOUD COMPUTING Started becoming a buzz word in about 2008 But first originated in the 1960s The IBM 1401 in c.1960 (left) In 1961 John McCarthy first proposed the time sharing model where computers could be provided as a utility service PG 6

8 07 CLOUD COMPUTING CLOUD SUCCESS STORIES PG 7

9 08 CLOUD COMPUTING CLOUD COMPUTING OPTIONS PUBLIC Scalable Reliable Inexpensive Location independent PRIVATE Scalable Secure Flexible Greater control HYBRID Scalable Secure Flexible Cost effective PG 8

10 09 AS A SERVICE AT YOUR SERVICE CLOUD COMPUTING SERVICE MODELS Packaged Software OS and application stack Servers storage network OS and application stack Servers storage network SaaS PaaS End Users Application Developers Servers storage network IaaS Infrastructure & Network Architects PG 9

11 10 10 MANAGED SERVICES MANAGED SERVICES Managed services are strategic, experience-driven outcome-based relationships with high levels of operational integration and scalability that leverage the specialized skills, processes and technology of an external service provider. REGULATORY AND COMPLIANCE COSTS Cyber risk and regulatory/compliance risk will grow the most in importance over the years 2017 to Globally banks spent $270bn to meet the demands of regulatory compliance in (Approximately 10% of their annual operating cost.) Source: 10 th edition of the Deloitte Global Risk Management Survey (2017)

12 11 11 MANAGED SERVICES THE EVOLUTION OF OUTSOURCING In 1992 American Express spun off its transaction processing unit. Outsourcing is expected to increase in the future. Especially in areas of an organisation that do not enhance competitive differentiation. OPERATING MODEL OPTIONS Managed services Traditional outsourcing In-house execution BANKING FUNCTIONS Designing and validating internal controls Managing back-office IT infrastructure Credit underwriting and monitoring

13 12 12 MANAGED SERVICES CONDITIONS FAVOURING IN-HOUSE EXECUTION Credit underwriting and monitoring Source: Deloitte analysis, Deloitte University Press

14 13 13 MANAGED SERVICES CONDITIONS FAVOURING TRADITIONAL OUTSOURCING Managing back-office IT infrastructure Source: Deloitte analysis, Deloitte University Press

15 14 14 MANAGED SERVICES CONDITIONS FAVOURING MANAGED SERVICES Designing and validating internal controls Source: Deloitte analysis, Deloitte University Press

16 15 15 MANAGED SERVICES SUMMARY A managed service relationship is often most applicable when resource needs are urgent, specialized and evolving quickly. But where competitive differentiation from the task is low or moderate. They are outcome focused strategic relationships that allow banks to focus on top strategic priorities, like growth and profitability.

17 16 16 BLENDING Cloud computing Regtech Managed services?

18 17 Data quality assessment 17 IFRS 9 CASE STUDY Data generation Data storage Credit Modelling Reporting and analytics Core banking & other data sources Data reconciliation, standardisation and masking Cloud storage ECL calculations Stage allocation IFRS 9 base results Out of model FLI adjustments and other portfolio adjustments IFRS 9 final results Bank process Data quality report Managed service MI reports IFRS 7 disclosures Finance and risk dashboard Bank process

19 18 18 CLOUD-BASED MANAGED SERVICES BENEFITS Scalability / Agility Security Flexibility Convenience of access Always up to date Pay as you use

20 19 19 CLOUD-BASED MANAGED SERVICES PRACTICAL CONSIDERATIONS Provider should have skin in the game Piloting, transitioning control and establishing oversight The concerns of different stakeholders Track record of provider Quality and continuity of staff Provider s reputation and institutional strength A global footprint assists in understanding cross-border business Consider tangibles (e.g. technology) and intangibles (e.g. culture) Cost versus benefit

21 20 20 CLOUD-BASED MANAGED SERVICES THE SARB S VIEW Cloud computing: Directive 3/2018 and Guidance Note 5/2018 Outsourcing: 2014 Policy Due diligence Data Legal contract Regs Business continuity Risk and controls IP and data rights Oversight Supervisor access Audits Comms and approvals

22 21 21 IFRS 9 IN AFRICA HOW ARE WE FARING? Challenges Interpretation of accounting standards Data integrity Systems and technology Lack of skills

23 22 22 IN CONCLUSION CONSIDER Are you getting the most out of your data? Do you understand your organisation s existing regulatory technology? Are you leveraging your existing technology to the full extent of its capability? (Or are you paying for things you don t need.)