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Wholesale Banks turn to ZLE to Enable Real-time, All-the-time Global Services

www.hp.com

Disconnected systems can overshadow the benefits of banking mergers, bleed profits, and melt market share. They also add complexity and delay to effective risk management. Here is how a HP Zero Latency Enterprise (ZLE) framework unifies disconnected islands of information and brings "real time" to banking operations.

To succeed in today's financial environment, wholesale banks need a global or enterprise-wide real-time perspective of their own and their customer's business, and to achieve high levels of straight-through processing, if they are to effectively tackle the challenges of T+1 and its impact on liquidity. The Basel 2 directives will add another dimension, that is the need for a consolidated on demand view of customer and trading exposure information that is essential to credit and market risk assessment, plus the need for absolute availability and accessibility which are essential factors in operational risk management.

Unfortunately, while wholesale banks were among the first to fully automate years ago, many are now frustrated by aging infrastructures, disconnected islands of information, and redundant systems. The faster banks grow, and the more industry consolidates, the greater the liability these competitive barriers become.

At a time when wholesale customers are looking for cost-effective, "always-on" services, the latency that disjointed systems introduce between processes makes it impossible to update and view enterprise-wide account balances and asset values in a timely manner, much less in real time. Also, the multiple, disconnected customer databases they support make it exceedingly difficult to implement new services and to adopt a customer-centric view.

No matter what its size, the only way for a bank to eliminate such obstacles is to create a systems environment in which it is easy to :

n Implement new standards and network all services

n Provide real-time information on balances and positions on a global basis

n Engage in rational reduction of duplicate applications systems moving to a shared service centre back office concept

Traditionally, creating this kind of systems environment has been a formidable, if not impossible, task. If you try to implement an enterprise-wide system with conventional means, such as custom programming and replacing older systems across the board, "you can't get there from here." Pulling together disconnected and disparate systems and rationalising duplicate applications are risky, costly, and time-consuming endeavours. Further- more, enabling the entire system for real-time operations is beyond the capabilities of most computing platforms.

A new approach-ZLE
Fortunately, there is now an approach to tackling today's disjointed wholesale banking systems-an approach that centres on implementing zero latency enterprise (ZLE) technology.

Zero latency enterprise is a concept that incorporates real-time recognition of business events and real-time integration of enterprise data and services. Translated into wholesale banking terms, a ZLE environment enables business events happening anywhere in the bank to trigger appropriate actions immediately across all other parts of the bank and beyond. At the same time, users benefit from up-to-the-second, consolidated business and customer views necessary to minimise risk and maximise profitability.

ZLE technology is implemented by constructing a ZLE architecture that interconnects numerous systems (both inside and outside the bank). Existing systems do not have to be replaced. Rather, they can be integrated by the ZLE architecture in a frictionless, real-time fashion. Hence, the bank gains

n Completely networked services-There are no more processing silos or islands of information.

n Rationally reduced redundancy-Systems and operations can be consolidated and duplication removed with little risk.

n Decreased costs-With rationally reduced redundancy and increased automation come a slew of cost savings, from reduced systems maintenance to

n Improved operational efficiencies (such as the elimination of intra-group data consolidation and reconciliation)

Leverage a global, real-time perspective
The advantages of ZLE translate into specific benefits for any bank seeking holistic, real-time views of its business, customers, and straight-through processing. For example, a ZLE environment enables customer data to be centralised, consistent, and always up to date so that it can be exploited for a 360-degree customer view across all contact channels. Banks are thus better able to profile their most profitable customers. They can then provide services that keep them that way and that attract other profitable clients.

Beyond customer-centricity, many day-to-day bank processes can only be performed accurately when all related data is available for evaluation. One is corporate cash management, with its risk evaluation, charging, pooling, and sweeping functions. Other examples include management of bank liquidity, accurate control of credit exposures, and active management of treasury and trading settlement risk.

When all of a bank's systems and services are networked and free of latency, departments and geographic regions enjoy unfettered availability to consistent information drawn from across the enterprise. In cash management, this means collateral can be used and released multiple times during a global day. Global transaction netting can be introduced with settlement of balances split across multibranch accounts.

Reduce risk and maximise asset value
In the area of risk management, real-time consolidated information can ensure that a customer's total line of credit is not exceeded, regardless of the volume and complexity of transactions. When one department makes a loan, the new account balance is made available to every pertinent system. When a trade order is issued, the customer's up-to-the-second bankwide balance is accessible immediately for evaluation.

With real-time account and asset balances, banks can better help customers maximise the use and value of their global assets, while controlling risk. For example, a view of real-time global asset balances allows assets in one country or time zone to be used somewhere else. Rather than sitting idly, they can be put up as intra-day collateral with the assurance that their availability is locked in, even when they are booked in a time zone that is technically asleep.

Similarly, the real-time perspective provided by a ZLE environment enables banks to make trades in time zones or payment centres that are most favourable at a given moment. Asset use is optimised, and the bank benefits from operational efficiencies-and a potential float.

HP ZLE framework
Why haven't ZLE technologies been available before? The answer is that they have, to an extent. But it takes a real-time platform and an open, extensible, and comprehensive architecture to bring them to fruition. This is something that HP provides today with the ZLE framework, which is essentially a unifying architecture for synchronising, routing, caching, and transacting in real time. It offers banks a low-risk way to rationalise IT infrastructures and eliminate multiple disconnected systems.

Built around a central hub, or ZLE core, the ZLE framework reaches out to bank systems (and systems outside the bank) through application or technology adapters. It is standards based and highly extensible so that the global system it enables encompasses a vast array of possibilities for integration. The ZLE framework also leverages 28 years of continuous computing expertise (fault tolerance, systems and databases that never have to be brought down for maintenance, cluster technologies, and so forth) and experience in supporting 24 x 7 global banking operations.

Real time to the core
The ZLE core runs on clustered servers for parallel performance, continuous availability, and scalability. Key core elements include:

n Centralised, real-time data store; also known as the operational data store (ODS)

n Real-time enterprise application integration (EAI) capabilities

n Centralised rules functionality

The ODS is a customer-centric database containing up-to-the-second records (current state information) drawn from transactions executing across and beyond the bank. Data from a multitude of applications flows into the ODS, becomes integrated, and flows out to appropriate applications in real time for an up-to-the-second view of balances, assets, and activities across the bank.

The ZLE core also supports real-time EAI messaging functions. When a change happens in any system anywhere in the bank, all other pertinent systems and databases connected to the ZLE framework are immediately synchronised. Applications integrate with the ZLE core in a standards-based, real-time fashion so that existing systems, systems acquired from mergers, new environments such as Web servers, and customer systems can all be drawn into the ZLE orbit.

The ZLE core is where workflow and processing rules are centralised. Banks can change how processes and events are handled by modifying the rules stored in the core workflow and business rules engines rather than by recoding multiple applications. This allows new applications and services to be quickly integrated into the global system. It also makes it easy to localise business rules governing specific products.

Added-value clip-on applications
The utility of this hub, or core, approach is enhanced by its support of clip-on applications, which integrate tightly with the ZLE core. These applications from HP's independent software vendor (ISV) partners leverage the ZLE core's real-time environment to provide value-added services specific to banking, such as payments, cash management, liquidity, asset management, fraud detection, customer relationship management (CRM), and narrowcasting for distributing alerts. By the same token, data mining and other business intelligence applications can draw from the data contained in the ZLE core for analysis purposes.

Real-time ROI
How fast can a bank recoup its ZLE investment? Literally as quickly as a ZLE framework can be deployed, which is very fast. The return on investment (ROI) that comes from rationally removing duplicate systems, minimising duplicate costs, and consolidating resources is compelling and immediate. But just as compelling are the advantages that flow from being able to launch profitable new products, take advantage of centralised payment centres, leverage intra-day liquidity, and quickly integrate acquired systems and products.

For example, one European wholesale bank employing HP's ZLE technology was able to reduce the number of its systems from 35 to only 11. It was also able to streamline the human resources necessary to manage its ZLE environment, from 250 to just 120. The combination of reduced infrastructure expenses, lower maintenance costs, and personnel efficiencies allowed them to cut overall IT spending by 50 percent within 18 months. At the same time, the bank gained the ability to offer profitable new global services much faster and less expensively than in the past.

Real-world advantages
Sustained market share goes only to those institutions that provide quality global services at a competitive price. At a time when a wholesale bank's systems and back-office processes are more critical than ever to market growth, cash and risk management, and cost control, it is crucial that they be unified in a common and cohesive environment. The HP ZLE framework fulfils this requirement, quickly and cost-effectively, while delivering the global, real-time perspectives banks need to compete.

HP Global Services and its partners offer complete life-cycle services to help wholesale banks implement ZLE solutions rapidly with minimal risk and operate them continuously. Thus the wholesale bank can begin leveraging the collective benefits of a ZLE environment now. And the advantages don't stop with implementation. Rather, they continue to accrue as the bank grows, and wins, globally.

Mark Pitchford

Chris Goulding

Hewlett-Packard

 

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