London-headquartered operational risk specialist Optial has released ‘OpRisk on Demand’ service based on its SmartStart platform. SmartStart Banking System is Optial’s flagship solution that provides a pre-defined operational risk, compliance and audit framework. The solution can be instantly deployed to any user with access using a browser interface as it is a standardised pre-configured and a fully web based solution. SmartStart, which has been available as a SaaS model for past 8 years, is now being offered as an ‘on demand’ service. The major driver behind launching the solution as an ‘on demand’ service was to make the solution more cost effective and easy and quick to use for the financial institutions. Optial is betting big on its new ‘pay as you go’ model and aims to attract more customers through the OpRisk on Demand service which offers the same features as its previous SaaS model but has added benefits of lower costs and rapid deployment. The minimum subscription period for the service is 6 months without any fixed monthly costs which can be upgraded to a three year term SaaS model.
Optial recently also entered into a partnership with FERNBACH, provider of analytical solutions for banks. Under the partnership, FERNBACH’s FlexFinance Analytix platform, a high performance modelling tool that scales to a wide range range of applications, will be embedded into Optial’s operational risk management system. The combined solution is a flexible integrated enterprisewide solution which will further enable Optial to increase its presence in the risk and compliance market. Optial also plans to seize new business opportunities in Europe, Africa and the Far East through FERNBACH’s various subsidiaries, resellers and partners in these regions.
Jane Tweddle, sales and marketing director, Optial, discusses the key features of the new OpRisk on Demand service, Optial’s business plans and its recent partnership with FERNBACH in an exclusive email interview with CRO.
Edited excerpts of the interview:
CRO: What are the unique features of Optial's OpRisk on Demand service that differentiates it from the competitors?
Tweddle: Rapid deployment is a key differentiator as our service is based on the pre-configured SmartStart system which is designed to be a ‘ready to go’ solution. OpRisk on Demand just requires the customer’s organisation structure and users to be configured. There is no set-up cost involved and since Optial is a pure web based system there is no infrastructure cost (only requirement being browser based Internet access) and system software cost. Moreover, there are no IT resource requirements as it is all handled by Optial and our hosting partner Rackspace. We can optionally load existing data that the customer may have, perhaps in a spreadsheet format. We manage the application for the customers including all system support and maintenance. The customers also have the choice to subsequently take the software inhouse and host it on their own IT systems.
CRO: What is the fee structure for organisations that choose to use this new service?
Tweddle: OpRisk on Demand is available on a monthly fee initially (with a minimum of 6 months subscription). We will configure the organisation structure and users along with roles and responsibilities and load any pre-existing data (such as losses, risks, controls, etc). The organisations also get the advantage of a reduction in the equivalent annual fee if they want to convert the service to a longer term commitment.
CRO: Are the various modules of your SmartStart Banking solution available as standalone packages or do they need a basic version?
Tweddle: The key five modules can be used either as standalone solutions or in any combinations sitting within the integrated core platform. The core platform includes all the main features such as access control, workflow, and reporting. This holds good for SmartStart also, which is a preconfigured, ready to go, version of Optial. New modules can be added to the system and integrated with existing modules. This feature enables customers to take a phased approach, if required, to implement the various OpRisk Management activities over time, rather than doing it all at once. When the new modules are phased in, only the incremental fee is charged and the new module will sit in a fully integrated environment with the existing modules and core system.
CRO: Who are the major users of SmartStart Banking solution globally?
Tweddle: Our client base includes Standard Chartered Bank, Rothschild Bank, the Bank of England and Skandinaviska Enskilda Banken (SEB), who have Basel II Advanced Measurement Approach (AMA) approval in a total of 8 countries. The workflow capability of Optial was a major factor for SEB to prove to the various regulators that the OpRisk process is embedded in the organisation’s Business as Usual (BAU) processes across 20 countries. Optial’s enterprise-wide solution for banking compliance at Standard Chartered has been rolled out to over 40 countries, with over 6,000 user accesses.
CRO: How much time does it taketo deploy the OpRisk system?
Tweddle: Our SmartStart system has been specifically designed and pre-configured to provide rapid deployment. The system already has standard workflow definitions, pre-configured categorisations for horizontal reporting such as Basel II event types and business lines, as well as risk, process and product categorisations. We have a standard approach to mapping and loading existing data into Optial. The Optial system can be up and running within a 6 week period.
CRO: What are the security features embedded in the OpRisk hosted model to give the comfort factor to banks?
Tweddle: To give completecomfort to banks, reliability and privacy are the important aspects of the solution apart from security. The hosted environment has SAS 70 certification as well as the inherent security features in the Optial solution. Hosted security features include fully managed multiple firewall architecture, multilevel key card access and comprehensive security access, 24x7 security monitoring, proactive intrusion and threat detection system, and data transfer using 128-bit encryption, most powerful level available. The customers have complete and exclusive access to their own systems where neither Optial nor any other third party is able to access client production systems and data. Other security and control features of the Optial solution include; granular access control to ensure data is viewable/editable only by suitably authorised users, password protection/encryption, tamper-proof audit trail which stores before and after images of the data and also forms the basis of the ‘As at’ in time reporting. All reports are generated in Optial, so that the sensitive data is secure and protected. And lastly, the product has a number of built in layers of defence.
CRO: Which partners do you work with for providing OpRisk solutions?
Tweddle: Our key partners are FERNBACH for quantitative modelling and Intertec Systems that represents Optial in Middle East, India and Pakistan. We are also in discussion with Atos which is one of our clients, about a more global coverage. Optial has specialist partners in Africa covering West, East and South African markets. We are in discussion with a number of other partners for South America, China and SE Europe regions and actively seeking partners in the APAC region.
CRO: Optial also entered into a partnership with FERNBACH recently. What were the major drivers behind this alliance?
Tweddle: Optial is largely a qualitative risk management solution and we wanted to provide more quantitative modelling capability, such as capital calculation, stress testing, and loss distributions in response to regulatory pressure the banks are facing to be able to perform scenario analysis, predict losses and assign appropriate capital. Also the ‘Holy Grail’ of the AMA under Basel II that can potentially reduce the capital banks are required to hold against possible losses – frees up capital that can then be used by banks for investments and product development / improvements. Nonetheless organisations increasingly need to understand what their expected losses and unexpected losses are to set risk appetite and tolerance. We are now able to support a number of mechanisms to enable organisations to perform loss distribution analysis. Looking at the options for doing this, we determined that there are plenty of established solutions in the market that provide this capability and, as we have had a close working relationship with FERNBACH for nearly two years, as we have the same distributor in the Middle East, it resulted in having mutual prospects. We quickly realised that integrating FERNBACH’s new Analytix modelling tool into Optial was an optimum solution. It’s a win-win for FERNBACH and Optial and also provides the market with an integrated and functional solution.
CRO: How will this alliance address new business opportunities?
Tweddle: Through our established relationship we are already working on a number of joint opportunities. We are also able to collaborate in such a way that each party can identify further joint opportunities globally. FERNBACH has subsidiaries, resellers and partners across Europe, Africa and the Far East that can complement Optial’s partnership programme to identify and close new business opportunities in these regions.
CRO: In which geographies will the new integrated operational risk suite be made available?
Tweddle: It will be available across all geographies through our respective operations and partner networks. The specificgeographies that we are focussing on initially though are the UK and wider Europe, Middle East and APAC.
CRO: What are your future growthplans, organic or inorganic, for the APAC markets?
Tweddle: Ideally, we would see growth in the APAC markets from establishing suitable partners for the region. Currently we cover possible interest and client support for the region from our London base. FERNBACH has a presence in a number of APAC regions and we hope to work with FERNBACH as indicated earlier. We are also in discussion with other possible partners for local representation which we feel is critical in terms of proximity, culture and credibility. We strongly feel that the Optial solution is of value to many organisations and types of companies within the APAC markets and the OpRisk on Demand option perhaps brings the Optial software to the desktop of such organisations in a rapid and cost-effective manner.
CRO: How do you view the growth of risk and compliance solutions in financial space in next 2-3 years?
Tweddle: Operational risk management (ORM) is now an established discipline within the financial services industry. Many of the early doubts and uncertainties about the practical benefits and robustness of methodologies have faded away. Recent high profile losses coupled with increased shareholder or regulatory pressures have made it mandatory for financial institutions to implement systematic and continuous processes for collecting, analysing and reporting operational risks. Chartis forecasts the worldwide ORM market to grow to $1.68 billion by 2013 at a compound annual growth rate (CAGR) of 6.9 percent. This growth is fuelled by following factors:
- Ongoing replacement market, as first generation ORM systems have proven to be too rigid or not scalable
- Ongoing demand from emerging markets of Asia, Africa and Latin America.
- Increased demand in specific vertical segments such as insurance, asset/fund management and broker/dealers.
- Convergence of OpRisk, ERM and GRC.
- Increased focus on benefits of compliance.
Increasingly firms are moving away from their fixation of ‘boxticking’ compliance and are working towards integrating ORM into everyday business activities. This has resulted in development of value-based ORM initiatives to justify the required budgets for comprehensive ORM and GRC systems. Typical business cases for investing in ORM include components such as loss reduction, capital savings, improvements in business planning and improvements in reputation/external communication.