Daiwa Securities SMBC Europe Limited (DSEL), the UK based investment banking joint venture owned by Daiwa Securities Group and Sumitomo Mitsui Financial Group, has begun the implementation of the Financial Studio finance resource planning software from Financial Architects (FinArch).
The implementation of the financial database is the second phase of DSEL’s far reaching project to re-engineer its middle and back offices and replace its mainframe. The first phase focused on systems infrastructure and reference data, with DSEL deploying technology from Tibco and GoldenSource and creating a consolidated data model for counterparty and securities data (Reference Data Review, August 2006).
DSEL considered deploying the positions functionality within the GoldenSource enterprise data management (EDM) solution for its project to consolidate all P&L, positions and trades into one database. However, it selected the FinArch solution because it is the more mature of the two, and because there was a better fit between the FinArch team and DSEL’s style of working, according to Graeme Muirhead, managing director, Technology Division at Daiwa Securities SMBC Europe Limited. “They understood better what we were trying to do with regard to the consolidation of financial data,” he says.
The FinArch solution includes a financial products database, sub-ledger, rules engine and reporting database. Financial Studio will consolidate all trade and position data from front office and settlement systems, apply data validation rules at various stages of processing, calculate valuation, P&L and cost-of-carry figures, generate IAS and UK GAAP accounting and manage the financial balances. The solution will also ensure direct links between financial balances and underlying trade and position information and ultimately support all product control reporting.
Financial Studio will also become the primary source of data for downstream reporting systems including the regulatory reporting system, market risk system and reconciliation systems. Information from the Financial Studio database will be combined with information from DSEL’s thin ledger to support the production of all management reporting.
Muirhead says it was always part of the remit of project one – its standing data and systems infrastructure project – to propose the next part of its overall strategy to re-engineer its middle and back office systems and replace its mainframe. “We always intended the second phase would be the implementation of a solution to create a database of all positions, transactions, funding information and capital allocations, to feed all our risk, regulatory, and management reporting systems,” he says.
Towards the end of project one, DSEL started the analysis for the next phase. “We knew GoldenSource had a positions solution, but we decided to do a complete review of the market: because we’ve taken a component based approach to our architecture development, we felt no need to take all components from one supplier,” Muirhead says.
Having begun consideration of phase two in November 2004, DSEL spent around a year talking to potential providers. Towards the end of 2005 it put out a formal requirements document and early last year saw some demos and carried out detailed discussions including site visits. “We continued that activity through the spring and summer and then in the autumn we carried out a POC with two vendors, FinArch and GoldenSource. At the back end of the autumn we selected FinArch,” he continues.
DSEL started the project at the end of last year, and is now in the detailed analysis phase. Muirhead expects the process of putting in place the new database and general ledger to take two-and-a-half to three years. He does not anticipate any “fundamental problems” integrating the FinArch solution with the GoldenSource standing data system. “We have integrated a number of much older, more difficult systems with GoldenSource – as far as we are concerned, the FinArch system is just another consumer of standing data.” Assuming phase two is successful, DSEL plans a third phase of the project, during which it will implement a new settlement system, completing the replacement of its mainframe. “Our fundamental strategic goal will have been achieved once phase two of the project is completed, because all our books and records and static data will be on new platforms,” Muirhead concludes.