KONDOR GLOBAL RISK

AXIS BANK BEYOND REGULATION, AN OPPORTUNITY FOR GROWTH

Case study

Axis Bank Kondor Global Risk Beyond regulation, an opportunity for growth

BEYOND REGULATION, AN OPPORTUNITY FOR GROWTH

Axis Bank, one of Indias top three private banks, has selected Kondor Global Risk for real-time risk management across its trading operations. The new system allows Axis to make proactive business decisions based on genuine risk intelligence while operating in line with regulatory demands and supporting growth opportunities.

Company profile
Axis Bank is one of Indias top three private banks, created in 1994 as part of Indias opening up of itsbanking sector that for decades had been dominated by government banks. As an innovative, new-generation bank in India, Axis has expanded consistently at a rate higher than the industry average and currently has over 1400 branches, including seven overseas offices serving retail and corporate customers. Today Axis is growing at 3035% per annum, but with a state-of-the-art risk monitoring function its business could push itself tohigher annual growth rates. It offers a wide range ofservices and products ranging from core banking products, treasury products like money market andFX, fixed income products (including corporate Indian bonds), and derivatives.

been accounting-oriented, designed to meet financial controls, rather than address risk management needs. As a result, Indian banks flagship systems have been focused on core banking functions which can capture the trades and do static credit checks, but lack comprehensive and dynamic market risk functionality. At Axis, this was addressed by building internal market risk functionality as an add-on to multiple in-house trading systems, typically involving more manual and less of STP type computation of risk numbers. The limitations of fragmented, manual computation precludes enablements namely dynamic stresstesting and Management Information System, flexible limits definitions and back testing all parts of the risk arsenal needed by todays risk analysts to keep the pace with the speed of business. Pravat Dash, Head of Market Risk Management at Axis Bank, explained, We were looking for an enterprise wide market risk system capable of integrating with multiple trading systems and consolidating all economic position information in a single place that could drive dynamic risk engines, define limits and support drill-down. Importantly, all this functionality needed to be performed on atimely basis and in an STP, automated process thatwould significantly cut the extent of effort needed to obtain meaningful risk assessments. Theconsolidation of positions in a single system separate from pre-existing trading systems was an important requirement, both to ensure enterprisewide consistency by harmonizing the data, as well as to ensure timely analysis by virtue of not having to constantly go back to source systems. After looking at a number of vendors and shortlisting four, Axis Bank decided to use the Kondor Global Risk system from Misys.

The business challenge

Axis Bank is one of Indias most forward looking banks in terms of transitioning to an advanced risk management system. The move is being driven as much by the banks strong risk management culture as by the Indian banking regulator which has embraced the advanced approaches under Basel II including the internal model (IM) approach and has set timelines for its adoption. The majority of risk management systems in Indian banks do not effectively support transition to IM. Regulation was not the only driver behind Axis proactive decision to implement a modern risk management solution. Even more important was Axis strategic decision to up its risk management wherewithal as a way to enable accelerated growth. The risk systems technology in Indian banks has not kept pace with the business growth. This is because banking software in this market has traditionally

Case study

Axis Bank Kondor Global Risk Beyond regulation, an opportunity for growth

The solution
The Kondor Global Risk (KGR) system, conceived from scratch as an enterprise risk system that canexist independently of any trading system (including trading systems from Misys like Kondor+), was a good fit to Axis Banks needs. Dash said, KGR provides a good platform for the banks requirements in VaR, limits, and compliance with our internal model requirements. It provides stress testing and back testing, as well as responsive risk dashboards to ensure risk transparency at any level of the organization. Beyond the functional and technological benefits, another important element in Axis decision was thecomprehensive nature of Misys delivery and support organization, and in particular the fact that it has a local support team in India that has previous experience in implementing VaR systems from Misys at six other Indian banks. This was important to Axisbecause the Indian market has a number of peculiarities (for instance, corporate bonds in India require special treatment). The project also required the integration of numerous front office systems from different vendors. The local Misys team had theskills to ensure that project risk would be kept toa minimum.

Key benefits
The new system is expected to have a significant impact in a number of areas:
Can support growth: Effectively support AxisBank in its high growth momentum byenhancing effectiveness of market risk measurement, monitoring and control related totreasury products and target a stable businessand income growth rate. Regulatory-ready: Prepare Axis Bank to complywith IM regulations when they decide onmigration. Less manual processes: Significantly reduce themanual effort involved in analytics and Management Information System, thus making the risk management process more accurate andtimely. Source of insight: Provide good visibility on therisk dynamics faced by Axis Bank through the dashboard for its large portfolio encompassing around 15 banking products and an array of derivative products.

Looking to the future

After the implementation of the new market risk system, the next natural milestone is to tune it to the IM regulations eventually enforced. Ideally, AxisBank would like to remain ahead of the other major banks in the market and finish the project ahead of schedule. Beyond that, credit risk presents the next area where Axis Bank might upgrade its risk management practices, especially in terms of aconvergence between market and credit risk. Todaycredit risk is managed in the core banking systems, so trading credit risk is excluded. As a possible future plan, Axis Bank might consider leveraging KGR as well for credit risk and use it as aplatform for potential new credit regulations, which are expected to be in the form of add-ons.

In total, there will be three core user groupswho will benefit from the new marketrisk system:

Users focused on producing reports, both for internal use and for regulators Risk analysts for modeling risk and conducting drill-down analysis Users who will do some integration with the current credit risk system

The project has been structured around threephases, delivered over 2011/2012:

Position consolidation and implementation of market limits to support pricing in client front office applications Implementation of historical simulation for marketrisk VaR Implementation of Monte Carlo simulation formarket risk VaR

Kondor Global Risk provides responsive risk dashboards to ensure risk transparency at any level of the organization.
Pravat Dash Head of Market Risk Management, Axis Bank

Case study

MISYS RECENT MARKET RECOGNITION

NUMBER ONE TRADING SYSTEM TECHNOLOGY PROVIDER

RISK TECHNOLOGY RANKINGS 2011
Number One Overall Trading System Number One Pricing and Analytics Equity Number One Pricing and Analytics Inflation

STRUCTURED PRODUCTS TECHNOLOGY RANKINGS 2012

Number One Trading System Credit Number One Trading System Cross Asset Number One Trading System Foreign Exchange Number One Trading System Rates Number One Risk Management Collateral Management

NUMBER ONE RISK MANAGEMENT TECHNOLOGY PROVIDER

ASIA RISK TECHNOLOGY RANKINGS 2011
Number One Overall Risk Management Number One Trading System Equities Number One Trading System Foreign exchange Number One Trading System Interest rates Number One Derivatives pricing and risk analytics Equities Number One Derivatives pricing and risk analytics Interest rates Number One Derivatives pricing and risk analytics Hybrids Number One Support services Implementation efficiency

BEST TRADING PLATFORM BACK OFFICE

ASIAN BANKER TECHNOLOGY AWARDS

LEADING SINGLE TECHNOLOGY PLATFORM PORTFOLIO, TRADING AND RISK MANAGEMENT

HEDGE FUND JOURNAL AWARDS 2011

STRUCTURED PRODUCTS TECHNOLOGY RANKINGS 2011

Number One Trading System Equities Number One Trading System Interest rates Number One Pricing and Analytics Equities

BEST RISK MANAGEMENT INITIATIVE

ASIA ASSET MANAGEMENT AWARDS

ABOUT MISYS Misys is at the forefront of the nancial software industry, providing the broadest portfolio of banking, treasury, trading and risk solutions available on the market. With 1,800 customers in 120 countries our team of domain experts and partners have an unparalleled ability to address industry requirements at both a global and local level.
Misys and the Misys globe mark are trade marks of the Misys group companies. Copyright 2012 Misys. All rights reserved.

Misys was formed by the merger of Misys with Turaz, which includes the award-winning Kondor+ product line. Combined they are able to address all customer requirements across both the banking and trading book businesses. Misys is the trusted partner that nancial services organisations turn to for help solving their most complex problems. Find out more at www.misys.com

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