SAP fleshes out its plans for capital markets modules on HANA



Having launched a Liquidity Risk Management (LRM) module to sit on its HANA realtime analytics platform, SAP is now working on the integration of that product with the Liquidity Management Suite (LMS) it got as part of its 2010 acquisition of Sybase and plans an Asset Liability Management (ALM) module for late 2013/early 2014. Ovum sees the ALM plan as particularly interesting, given that the vendors it will be competing with in that space do not work on in-memory database technology like the one at the core of HANA, and this should appeal to companies as they move to address both the increasing data volumes and higher frequency of future ALM requirements.

SAP will integrate LRM and LMS

The LMS module actually came to SAP through Sybase but originally came from Aleri, the complex event processing (CEP) vendor Sybase had purchased a few months before its own acquisition by the German enterprise software heavyweight.

Aleri had LMS as an app that worked on its CEP engine, and first Sybase and then SAP have continued to support the customer base for that product. Indeed, it is now moving it to the latest version of the engine, v6.1, at which point it will be in a position to communicate with HANA and the LRM module as part of an integrated Liquidity Management/Risk Management suite. Beyond that, SAP intends to develop an ALM module, based on already existing ALM functionality, for launch by early 2014.

ALM and Liquidity Management are converging

ALM is designed to detect mismatches between assets and liabilities and the resulting working capital requirements, funding gaps, and so on, enabling companies to take remedial action in a timely fashion to bring their balance sheets back into line, both from an internal governance and external compliance perspective. It is a discipline which, until now, has largely been conducted separately from liquidity management, but the present regulatory climate, and in particular the advent of the Basel III regulatory standard for bank capital adequacy, is tending to drive convergence between the two. Under the new Basel rules, banks are required to manage both their liquidity coverage (i.e. the liquidity risk management side of things) and their net stable funding (i.e. ALM).

As part of these developments, ALM is moving from a weekly or end-of-day activity to an intraday one. Indeed, in an ideal world it might even go realtime, though current back-end systems are not yet ready for such a level of functionality.

This increase in frequency represents a significant challenge to existing ALM systems, while another is that ALM is conducted on an enterprise-wide basis – as regulators require – rather than in a siloed manner for each trading desk, for instance. This incurs a major increase in the volumes of data passing through a single, central ALM platform, as calculations become larger and more complex.

It is interesting that SAP foresees a trajectory for its product offering going from LRM to ALM, given that many of the tech vendors casting covetous eyes on the LRM market are companies that have traditionally played in ALM who are now developing add-ons in order to offer LRM. What underpins both journeys is a commonality of function, in that both ALM and LRM rely on the ability to track changes in a number of accounts, to carry out calculations based upon them, and to make decisions based on the results. In the case of ALM, those actions may be to engage in a hedging action or open a line a credit if required by current liabilities, or to increase trading activity if assets are found to permit it.

In-memory analytics will differentiate SAP’s ALM offering

A significant difference between an eventual ALM offering from SAP and current products on the market, however, will be that it will be based on the realtime analytics platform with the HANA in-memory database at its core, whereas the competition’s offerings are typically built on older technology, dating from a time when ALM could be carried out at a somewhat more leisurely pace. Most likely they too will seek to add more intraday, near-realtime capabilities to their products, particularly if they seek to position them as the basis of LRM offerings. Ovum expects to see them allying with in-memory database vendors or licensing their technology to achieve this.



Rik Turner, Senior Analyst, Financial Services Technology

Further reading

Liquidity Risk Management After the Crisis: More Important Than Ever (January 2011)

“SAP offers Liquidity Risk Management module for realtime analytics platform” (November 2012)


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