Germany’s Bayer AG has implemented a selection of SunGard’s Adaptiv solutions for risk management to ensure it meets the fair value accounting mandates of the International Financial Reporting Standards (IFRS 13) and is ready to comply with European Market Infrastructure Regulation that is expected to come into force later this year.
The German enterprise that specialises in healthcare, agriculture and high-tech materials on a global basis, went live with the SunGard solutions late last year and has completed first quarter reporting with the risk calculation systems.
The company is using SunGard Adaptiv 360 for trade capture, position keeping and to calculate sensitivities. It is also using Adaptiv Analytics to support Monte Carlo based calculations of risk measures such as value at risk, potential future exposure, credit valuation adjustment (CVA) and debt valuation adjustment (DVA). Adaptiv Risk Cube provides Bayer’s risk managers with the means to drill down and analyse risk results, while Adaptiv Operations integrates risk results with back-office functionality and the company’s treasury platform.
The SunGard solutions provide an automated approach to risk calculation and management, replacing a pragmatic method that included manual short cuts and inherent operational risk.
According to Alexander Burck, head of corporate financial control at Bayer, “To help mitigate risks, Bayer decided to use the same risk management methodologies used by some of the largest and most advanced global banks. SunGard’s Adaptiv solutions enable Bayer to determine, monitor and steer its counterparty risk accurately and consistently across its counterparties. With the automated Adaptiv Analytics solution in particular, we are able to calculate Monte Carlo based CVA and DVA and attribute the results accurately to the trade level, even within netting sets, helping us to comply with regulations such as IFRS 13.”
For SunGard, Bayer is a good win in the corporate market. Sven Ludwig, director for risk, SunGard Adaptiv, says: “We see most demand for Adaptiv solutions in capital markets, but more demand is coming from corporate markets where companies are focussing on risk to meet increasing regulation.” Reflecting the corporate sector’s slight lag behind the banking sector in terms of automated risk management, Bayer is reporting on an end-of-day basis on many of its risk measures, but is expected to work with SunGard to meet the emerging banking standard of real-time reporting.