Realizing Operating Efficiencies Through a Platform-Based Approach: A Case Study

Transcription

1 Realizing Operating Efficiencies Through a Platform-Based Approach: A Case Study Henry Marquiss SVP, Specialty Loan Accounting, PNC Umar Syyid CTO, Primatics Financial

2 Agenda Background Future Targets Achieving Operating Efficiencies through Consolidation Leveraging a Domain Aware Platform Challenges & Risk Fit with Existing Architecture Results 2

3 Background: PNC s Rapid Growth PNC has grown rapidly in the past 7 years through a series of acquisitions and organic growth during a tumultuous credit, regulatory and business cycle. This led to: Tactical investment in parallel on both automated and human based processes to solve for business changes across the back office in both the finance and risk areas Multiple complex systems and businesses processes rapidly setup that now require careful thought to scale and manage Credit Cycle Bottoms Regulatory Changes for Non Performing Assets Accounting Guidance for Restructured Assets Announced National City Bank Acquisition Announces RBC US Acquisition Loss Mitigation Efforts Peaked Initial Dodd Frank Reforms Enacted Bank hits $300Bn in assets 3

4 Establishing Targets and Strategy Simplify operating architecture, remove redundancies and reconciliations Save money, primarily focus on reducing current operating expense Improve future ability to handle business and regulatory change Fit within enterprise data and systems architecture (finance architecture, data architecture and IT roadmap) Strategy formulation Joint discovery effort (Primatics/PNC) to first fully understand current landscape and then recommend a solution to meet PNC s goals. Started project in Q Formulated recommendation mid Q4. 4

5 RISK PROCESSES Solution: Consolidate with a Single Platform Analysis of Legacy Paradigm The Platform Paradigm DIFFICULT REPORTING What if? SILOED PROCESSES GREATER CONTROLS, LESS RISK INCREASED EFFICIENCIES NPL SOP 03-3 Nonaccru al FAS 114 FAS 91 RE Credit Models Specific ALLL TDR Scena rios. COMPLEX RECONCILIATION DISTRIBUTED SUPPORT & MAINTENANCE ONE SUBLEDGER WITH MULTIPLE PERSPECTIVES RISK PROCESSES SINGLE PROCESSING SPACE Siloed Processes, Complex to Support and Adapt to Change Confluence of change; credit, risk and finance coming together to build solutions Complex data integration processes between siloes particularly as they cross natural domain boundaries Large and continuing human capital investment with focus on running the process in a controlled way Multiple hand-offs between processes, data copying and point-to-point reconciliations Single Platform Solution One platform for loan finance functions, reducing operating costs and providing consistency across the institution Ability to extract and enrich data from internal and other third-party systems Greatly reduced reconciliations and automated, flexible workflows Expected operating efficiencies of ~ 30% annually 6/23/2015 5

6 SDK Extensibility Features Enterprise Service Bus (ESB) Supported Protocols (REST, SOAP, JCA, JMS) Leveraging a Domain Aware Platform Still just a platform but pre-packaged services are specific to the problems associated with the operating domain (bank finance concerns in this case) Domain Aware Services: Finance & risk relevant services on top of which a set of solutions are provided Solutions Smart Data (Sourcing and Analytics) Loan Accounting & Forecasting Credit and Reserving Model Execution Business Workflow Layer Domain Aware Business Services Lifecycle Event Processing Calculations Accounting Rules Calculations Risk Rules Journalization Reporting Common Technology Services Platform Services Multi-Tenancy Identity Management Distributed Computing Integration Services Persistence Infrastructure Services Security Cloud (Utility) Computing Software-Defined Storage 6

7 Building Functions on Top..category leaders combine deep domain knowledge in various risk topics with deep technology assets and capabilities. They can demonstrate this by addressing the needs of very large clients with complex risk management and technology requirements, as well as addressing the needs of smaller clients with standardized requirements Production Data Flows Loan Accounting Credit Disclosures PNC Risk Analytics Less is More PNC Business Process Integration Extension Extension Data & Orchestration Build bank specific solutions by focused development of orchestration and extensions that augment and leverage existing business services available on the solution. 6/23/2015 7

8 CREDIT OP ACTG RISK A Closer Look: Complex Problems Solved with Business Services Credit Accounting Solution ID ENGINE EVENT SVCS LOAN MASTER TDR SUB LEDGER JOURNAL ENG 114 ACTG PCI ACTG AMORT MODEL EXEC EXPECTED CFLW FAIR VALUE CFLW SVCS NON PERFORMING EVENT OP & ACTG TRANSACTION FLOW RISK ANALYTICS EVOLV Deeper Look: Solution Architecture Information flows required to perform credit accounting functions include flow from operational, risk and credit systems. 1. Leverage loan credit identification services (non-accrual, credit restructurings, TDR etc.), convert to accounting events and record for disclosures 2. Capture operational accounting transactions and then leverage various credit accounting services to calculate accounting adjustments and accretion within sub-ledger 3. Connect with risk analytics functions to convert risk outputs to expected cash flows, fair values and other modeled outputs to compute allowance adjustments 6/23/2015 8

9 Challenges with Platform Approach Data normalization is complicated. The same data elements mean different things to different stakeholders, requiring a multi-verse perspective to be effective Integration with source systems with closed architectures generally requires a focus on simplification to ensure interfaces don t break Determining what are truly reusable building blocks across a domain without overcomplicating architecture by adding services that are never reused Establishing a production paradigm that includes multiple parties, including multiple business and technology groups on the same platform Building a team, knowledge base and support structure internally to support agile delivery 9

10 Fit with Bank Architecture - Intermediate State Other Applications Enterprise ODS Commercial Retail Enterprise Information Pluggable Adapter Architecture Architecture Bank Operating Platforms Enterprise Warehouse Feeds to Enterprise Mortgage Other Data Finance User Other Finance Systems 10

11 Fit with Bank Architecture - Future State Other Applications Enterprise ODS Commercial Retail Enterprise Information Pluggable Adapter Architecture Architecture Bank Operating Platforms Enterprise Warehouse Feeds to Enterprise Mortgage Other Data Enterprise Data Finance User Other Finance Systems 11

12 Result of Improvements BEFORE Acquired Loans (PCI & Non- Impaired) AFTER Acquired Loans (PCI & Non- Impaired) NaCo (Core and RTA) TDR 2013 FUNCTIONALITY 2015 FUNCTIONALITY FAS 91 NaCo (Core Only) Loans in Evolv 94 % of PNC loans on the platform Enhanced Reporting Automated Disclosures Summarized Results Primatics EVOLV Solution Creates substantial ROI, cutting annual operating costs by 30% Positions PNC to quickly adapt to changing strategies and to scale operations expediently and efficiently Enables better decision-making through more advanced analytics and elimination of timeconsuming processing steps Enables more automated and defensible compliance of critical current and potential future regulations Through the integration of data, applications, and analytics, greatly consolidates and/or eliminates needs for point solutions, hand-offs, reconciliations, manual steps, etc. 12