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Fincad and SAS Discuss New Partnership for Enterprise Risk Management and Valuations

Fincad has got fully into the swing of the current vendor partnership trend; not only has the derivatives analytics vendor teamed up with interdealer broker Icap for a valuations solution, it has also recently formed an alliance with SAS for a new joint enterprise risk management and independent valuation offering. David Rogers, SAS global product manager for risk, and Amar Budhiraja, director of the Fincad Alliance Programme, explain the details of the combined risk management and valuations solution to A-Team Group.

SAS and Fincad last week formalised their alliance aimed at providing the market with a combined solution that improves risk management and allows firms to comply with increasingly onerous rules around valuations transparency. “Fincad and SAS chose to collaborate together as both firms recognised the benefits of providing a complementary solution to clients especially given today’s critical needs for enterprise risk management and independent valuations,” explains Budhiraja.

From Fincad’s perspective, Budhiraja says that the vendor feels SAS is well recognised in the capital markets for having a “robust solution that provides an enterprise framework for data management as it relates to risk analytics and risk information distribution”. He believes it is the leader in business analytics software and services space: “It supports financial institutions’ risk management activities by delivering functionality for all major risk types, as well as data management and reporting. Its risk management solutions allow business units to independently and separately calculate measures of risk, such as market, credit and application lifecycle management (ALM), as well as calculate firm-wide risk measures using models and correlated aggregation techniques.”

According to Rogers, SAS and Fincad observed the common nature of their respective customer bases a couple of years ago and have since identified the benefits of closer cooperation. This spurred SAS to join the Fincad Alliance Programme as a solution partner. “Specifically, SAS has made it easy for banks to integrate Fincad’s analytics library with SAS risk solutions – SAS Risk Management for Banking and SAS Risk Dimensions,” he elaborates.

Fincad began its first collaboration with SAS to provide a solution for a client over three years ago, adds Budhiraja. “Since then, the Fincad and SAS solutions have been implemented for multiple client projects across the globe. A more formal relationship came into place in the first half of 2009,” he explains.

The aim is to provide a comprehensive set of risk capabilities covering market, credit, operational, and firm-wide risk. The combined offering seeks to offer access to Fincad’s cross-asset class derivatives and fixed income analytics libraries, which use industry-standard models and thus provide full disclosure of data, models, analytics and risk measures.

“Fincad’s solution therefore enhances the risk solution from SAS as it provides the derivatives pricing component, which gives firms a trusted, independent source for their financial instrument valuations,” says Budhiraja.

SAS’s approach to integrated risk management is to provide an open environment where clients can easily integrate new and existing capabilities, including in-house and third party pricing libraries, continues Rogers. “In the case of Fincad the popularity of its pricing library made the case for SAS to partner with Fincad to allow clients to accelerate the implementation of the two systems,” he explains.

The partnership with Fincad is therefore part of the SAS strategy to provide a comprehensive risk management offering and pre-built solutions, coupled with predictive analytics, according to Rogers. “The vision is to provide a risk management solution to financial services companies to manage risk across the complete firm in an integrated fashion. The need is to provide a complete, end to end risk management solution. Only SAS addresses every aspect of enterprise risk management – from identification, to measurement, to mitigation and ongoing monitoring,” he contends.

Integrated risk solutions will certainly prove important for financial institutions this year, given the regulatory focus on firms proving their risk management capabilities via new reporting rules. This goes right the way from measuring exposure to individual risk types, such as liquidity, through to inter-risk stress testing for concentration risk measurement purposes (see the Committee of European Banking Supervisors (CEBS) guidelines published at the end of last year for example).

Rogers indicates that the combined offering is based on a best of breed ethos that allows clients to accelerate their time to market with the implementation of the two systems in one go. “It allows clients to reduce their development costs since the research and development, quality assurance, and other resource costs have already been invested in the products by the vendors,” he adds.

Budhiraja adds: “As enterprise-wide risk aggregation and visibility and the need for independent valuations will become even more critical for financial institutions in 2010, our collaboration with SAS allows us to provide relevant solutions to meet these needs.”

Pricing and valuations transparency is another set agenda item for the regulatory community this year and it has already made the headlines during recent risk related discussions. The issue of calculating expected losses and the related reworking of fair value measurement should ensure that increasing valuations data transparency remains a top priority for financial institutions this year.

Fincad is certainly keen to retain an edge over its competition in this space, which has become increasingly crowded over recent years. Its partner programme is a key method via which it hopes to increase both its product coverage and its global reach. To this end, Fincad also signed a deal with Icap last year and has since been adding new functionality to their combined Fair Value Insight solution. Fincad’s number of client wins this year should indicate whether this partnership approach is a savvy move or not.

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