Best Practices Models For Banking: IBM Software Group - Industry Models and Assets Lab

IBM Software Group – Industry Models and Assets Lab
Best Practices Models for Banking
Jiang Li
Industry Models and Assets
AP Software Group
© 2007 IBM Corporation

Agenda
Introduction to the IBM Banking Industry Models

– Information Framework (IFW)
– Financial Services Data Model (FSDM)
– Financial Services Function Model (FSFM)
– IFW Process Model
– Business Object Model (BOM)
– Interface Design Model (IDM)
Integration of Models
Overview of Use of Models in Development Lifecycle
Case Studies
2 © 2008 IBM Corporation

The Information FrameWork (IFW)

A framework of integrated business models, describing different aspects of the
analysis and design required to support a financial institution
IFW FOUNDATION MODELS:
IFW FOUNDATION MODELS
FSDM FSFM FSWM STANDARDIZATION, SCOPING AND DEFINITION OF BUSINESS TERMS
IFW PROCESS MODELS:
IFW DATA MODELS IFW PROCESS & INTEGRATION DETAILED ANALYSIS OF BUSINESS PROCESSES
MODELS
IFW INTEGRATION MODELS:
BDWM IFW PROCESS MODELS
ANALYSIS AND DESIGN OF REUSABLE BUSINESS
FUNCTIONS REQUIRED AT THE APPLICATION SERVER
BST FS-BOM
AST FS-IDM

Financial Services Data Model

Standardization of over 3800 business information concepts, and the relationships
between business information concepts
IFW FOUNDATION MODELS FSDM expressed business concepts by classifying according to
9 fundamental data concepts:
FSDM FSFM FSWM
IFW DATA MODELS IFW PROCESS & INTEGRATION

MODELS
BST FS-BOM
AST FS-IDM
Arrangement ARRANGEMENT CUSTOMIZATION
ARRANGEMENT FREQUENCY
ARRANGEMENT LIFECYCLE STATUS Potential Arrangement
… Proposed Arrangement
Offered Arrangement

1
2
In comparison, our enterprise data model (EDM) framework was
3
4
created in 2003. IFW’s FSDM was used and tuned/extended to our
5
needs.
We have enhanced
about 5% of these
subject areas for
specific business
use.
To facilitate wider
discussions, another
10%-15% of updates
will be needed.
5
Version : 2.0
Presentation Title & Date
Cost control
Reduce software development risk
Significant productivity increase
Uses of Financial Services Data Model
Enterprise data management
– Business data stewardship
– Data quality management
– Standardization of business meaning of data across organizational lines of control
– Reducing redundancy and inconsistency of data capture
Legacy application audit of data content
Legacy application integration improvement
Precise project scope of new data requirements, reducing project

delivery risk and cost
Higher quality ISV vendor selection, as independent of technology
Core system development

Financial Services Function Model

500+ standardized business functions (“What we do”) that may be managed within
your business
IFW FOUNDATION MODELS FSFM provides detailed business definitions for business
functions
FSDM FSFM FSWM
Proposed New Application Scope

MODELS
BST FS-BOM
AST FS-IDM
Scope of an Existing Application
ARRANGEMENT MANAGEMENT ARRANGEMENT ACCOUNT ADMINISTRATION
ARRANGEMENT NEGOTIATION
COLLATERAL MANAGEMENT COLLATERAL MONITORING
… COLLATERAL PERFECTION

1
2 A business function model was developed in 2005 using IFW’s
3
4 function model (FSFM).
5
To define these 60
functions from
scratch we estimate
would take 80-120
LDE1. Actual figure
using IFW 40 LDE.
FSFM has almost
500 functions
defined.
8 (1). LDE = Labour days of effort.
Version : 2.0
Presentation Title & Date
Cost control
Reduce software development risk
Manage complexity
Benefits of Financial Services Function Model

More precise, consistent definition of business function to be
provided in new software development portfolio
Enables tool for quantitative cost control of development of

overlapping, or divergent business functions, especially in software
application development or purchase
Mergers and acquisitions; provides neutral tool to perform analysis

of redundancy, gaps, or value enhancing organizational overlap
Rapid standardized analysis of ISV packages, or legacy applications

Financial Services Workflow Model

A library of standardized business activities, triggers and verbs
IFW FOUNDATION MODELS FSWM provides detailed business definitions for standard verbs,
detailed classifications of triggers (time based, decision based
FSDM FSFM FSWM etc), and detailed activity roots that highlight the commonality
between specific business activities

MODELS
BST FS-BOM
AST FS-IDM
EXPANDABLE OBJECT OBJECT ACCEPTANCE ACTIVITIES

ACTIVITIES
OBJECT AUTHORIZATION ACTIVITIES
OBJECT DETAILS Administer * Details

ACTIVITIES
… Access * Details

IFW Process Models

To Be business process model templates capturing the end to end
processes of the financial institution
IFW FOUNDATION MODELS
FSDM FSFM FSWM
Over 350 process templates!
1840 defined process tasks / activities!

MODELS
BDWM
Over 94 defined data object templates
IFW PROCESS MODELS
BST FS-BOM
Over 1900 process events / triggers
AST FS-IDM Optimized to start from maximizing

process tasks for reuse
ARRANGEMENT NEGOTIATION PROVIDE LOAN ARRANGEMENT OFFER
ACTIVATE LOAN ARRANGEMENT
REVIEW OFFERED ARRANGEMENT STATUS
PROVIDE ARRANGEMENT PROPOSAL

The IFW Process Models
Analyze and design optimal, reusable and consistent “To Be”

processes, derived from proven templates which are:
– Independent of channel
– Independent of specific line of business structure
– Independent of explicit product line
– Independent of specific customer segment
– Independent of technology
– Independent of legacy systems, or a specific ISV’s solution (vendor neutral)
If you don’t start from this level of independence, it is impossible to

perform real BPR or BPM, as the starting point is usually a “tactical”
enhancement to the status quo which does not lead to true
“common processes”, or systematic transformation

Why Customers Model

Modeling for compliance / documentation
– Document processes for use by a business to understand the
business process
– Customers use output for training, collaboration, documentation
requirements for compliance regulations (Sarbanes-Oxley and
Basel II)
Modeling for redesign

– Document both the current state and future state business process
and the comparison to determine Return on Investment (ROI)
analysis
– Six Sigma, Lean Manufacturing, Value Based Management and
Process Improvement, Total Quality Management (TQM) are
common methodologies
Modeling for execution

– Process documentation used to generate executable processes
– Linkage to historical data and real-time data to provides a feedback
mechanism for reporting requirements needed for compliance or
monitor and control functions

How we present to lines of business
Presentation of a set of value chains that present line of business functions that are
supported by a set of long running business processes.
Value chains are composed of a set of chevrons, each chevron represents a phase
of processing which results in the change of state in the acquisition, creation and
consumption of resources for the creation of wealth or value.
One or more long running processes occur within a single chevron.

Listed on the value chains are a partial subset of the recommended IFW Process Model
“To Be” templates
Identify Verify Establish Maintain Service Terminate
Operational, Credit & Market Risk Management
Monitoring, Control and Customer Insight
Chevron
Identify Potential Customer
Identify Customer Recommended IFW Process Model “To Be” templates
Identify Involved Party from Role

Sales & Relationship Management (Customer, Supplier, Employee)

Verify IP Access Authority Details Provide Involved Party Information
Develop Arrangement Opportunity Develop Customer Wallet Share
Review Proposed Arrangement Status Determine Customer Profitability
Request Supply Proposal Establish Customer Generate Communication Details
Request Supply Arrangement Establish Involved Party Provide Past Due Consultation
Provide Employment Arrangement Offer Consult Customer
Provide Banking Product Arrangement Offer Activate Loan/Deposit/Transfer Arrangement
Provide Loan Arrangement Offer Administer Dispute Resolution
Provide Deposit Arrangement Offer Supervise Dispute Resolution
Provide Transfer Service Arrangement Offer
Identify Verify Establish Maintain Service Termination
Operational, Credit & Market Risk Management
Modify Involved Party Details Administer Business Account Closure

Identify Potential Customer
Identify Customer Requirement Terminate Involved Party Information
Identify Customer
Maintain Payment Beneficiary Details
Identify Involved Party from Role
Maintain Registered Beneficiary Details
Develop Customer Wallet Share Retrieve Customer Arrangements
Generate Cross Selling Lead Review Involved Party Information
Review Supply Arrangement
Review Customer Portfolio
Generate Credit Risk Report Review Loan Arrangement
Generate Operational Risk Report Review Product Arrangement
Generate Market Risk Report Determine Customer Profitability
Review Counterparty Credit Limit Determine Market Segment Profitability

Lending
Develop Arrangement Opportunity
Provide Maturity Pre-notification Administer Repayment Collection
Review Proposed Arrangement Status Administer Account Transfer Administer Arrangement Suspension
Provide Arrangement Proposal Provide Interest Accrual Provide Arrangement Balance Calculation
Identify Potential Customer Provide Interest Netting Provide Arrangement Fee Reimbursement
Generate Cross Selling Lead Record Transaction Dispute Administer Arrangement Reactivation
Develop Customer Wallet Share Administer Dispute Resolution Provide Arrangement Statement
Apply Arrangement Fee Administer Arrangement Details Modification
Provide Past Due Consultation
Verify IP Access Authority Details
Identify Customer
Provide Loan Arrangement Offer
Retrieve Full Customer Details
Product
Sales Decide Origination Servicing Termination
Management
Operational and Credit Risk Management
Develop Market Offering Proposal Acquire Security Settle Loan Arrangement

Evaluate Market Offering Feasibility Activate Loan Arrangement Administer Business Account Closure
Develop New Market Offering Provide Loan Disbursement Administer Arrangement Termination
Prepare Market Offering Launch
Prepare Market Offering Release
Review Finance Service Commitment Review Loan Arrangement
Review Loan Portfolio Quality Determine Arrangement Profitability
Determine Product Profitability
Generate Credit Risk Report Generate Operational Risk Report

Review Sample Safeguard Collateral Review Arrangement Safeguard Collateral
Administer Legal Collection Monitor Restricted Account Access
Provide Past Due Communication Evaluate Market Offering Compliance

Financial Services Business Object Model

Business functional specification templates of analysis requirements for software
automated services called in end to end process
IFW FOUNDATION MODELS FS-BOM captures those activities within a business process
that indicate the presence of reusable or automated services.
FSDM FSFM FSWM These activities are analyzed in detail, producing a detailed
Unified Modeling Language (UML) class model of the concepts
referenced by those services.

MODELS
BSTs FS-BOM
IFW ODS FS-IDM
Business Model Object Accounting Unit
Arrangement
Assessment Demographic Assessment
… Financial Valuation

Financial Services Interface Design Model

Platform independent model of design of software components and
services / commands to support a business process
IFW FOUNDATION MODELS FS-IDM takes the analysis contained within FS-BOM into a
design domain, structuring detailed software components, the
FSDM FSFM FSWM services or functions they expose or provide, and the
collaborations between services to meet business needs.

MODELS
BST FS-BOM
AST FS-IDM
Business Components Arrangement Account Administration
Asset Management
Arrangement Management IArrangementauthorization
… IArrangementMonitoring

Integration with IFW…
The Information Framework
Foundation Models
Financial Services Financial Services Financial Services
Data Model (FSDM) Function Model (FSFM) Workflow Model (FSWM)
IFW Integration Models
Banking Data IFW

Warehouse Process Models

All this provides top to bottom traceability…
FSDM IFW Process

classifications
activities
values
FS-BOM
use cases
classes models
FS-IDM
services
collaborations
class models

Financial Services Sector
Disclaimer
Presentation of named client projects does not mean that these clients have
advised IBM that they are willing to act as a reference site for IBM. The information
in this presentation is either in the public domain, i.e. has been published in the
press, or has been presented at a public forum.
Requests for reference calls via a conference call or a site visit must be arranged
via formal IBM relationship management contact points.
21 Business Process Model Developments in Financial Services | | Confidential © 2006 IBM Corporation
future state definition
In order to address our challenges we are using IFW models to help

scope the future opportunities.
Define what the
opportunities are
Common business issues Project Scope
Concept / Scope
speed to market
common processes
straight through 2
1
3
processing Data Model Function Model Business
Processes
development costs
process / product silos 4
5 6
errors / rework
Gap analysis /
system complexity
Concept papers
Existing Applications
7 May, 2008 Business Process Trends in Financial Services 22

developing IFW strategic slices
Once the opportunities are defined we can then prioritise projects and
create logical transitions.
Define how it
will look
High priority focus points according to immediate business imperative Project Design
Specification / Design
CL Business Strategy
Value chain
Prioritised 7
Projects
automate manual
10 8
Business Objects /
Business
Use Cases
Process
e.g Customer Info e.g CMS e.g Decisioning Redesign
Release 1 (T1)
11
Release 2 (T2)
… Interface
Design
9
Release n (Tn) Six sigma /
CommWay
12 (Process
Improvement)
XML Schema /
XML Messages

how do bottom up / top down services work
There are two methods of defining application services:

Bottom-up: the model is mapped to existing applications
Top-down: the model is used to determine the future state
IFW Base
Models
Top down
Approach
Process design
Current Processes
Origination CBA Top-down

constrained by
defined
current systems
Process
Top-down analysis
Data Prep
Credit Risk
? CBA Top-down
usually produces
business aligned
services
customised
…
BOM
Credit Scoring
CommSee
Current Systems
CBA Top-down
customised
Documentation
IDM
Bottom- up
defined Top-down
Workflow defined
services services
Bottom-up analysis Product …
produces system
aligned services
Bottom up IFW Base
Approach Models

the IFW usage spectrum
As we look along the IBM Models usage spectrum we discover that both
approaches are beneficial however greater reusability is derived from process
aligned enterprise services.
Service Oriented Architecture Layers

Presentation (Currently outside SOA scope as still relatively immature)
Management (Security, Performance

Business process (Choreographed workflow)
Modelling multiple
& availability)
Technical process (Orchestration of services)
Using IFW products as Modelling
business types objects consistent
Using common Using common Services (can exist as isolated atomic services or composite services)
IFW value business terms hierarchy and

reusable
interfaces
usage structure Enterprise components (IFW services that wrapper broad functionality)
spectrum $ $$$ Operational systems (legacy and object oriented systems)

Mainframe
Custom Process aligned

messages and IFW messages
schemas and schema
Bottom Up Top Down

9 proven within the current system context 9 common reusable services
9 cost-effective immediately available 9 not hindered by the current system
9 traceable to business requirements.
× limited by the current systems
× specific to process (point to point) × harder to get business buy in
× does not facilitate componentisation × requires more effort than enabling existing

Large Scale Re-engineering Example
Model – Best practice Process Models available in WebSphere

Business Modeler and Data Models reduce risk and cost of multi-
channel transformation
Assemble – Multi-channel Transformation Reference Architecture and
Branch Transformation Toolkit increase speed of development
“The IBM models are
Deploy – Software Component Template Models speed deployment of
web services based processes, available in Rational. Workplace for a blueprint for
Client Administration tools speeds application deployment across banking and
multiple branches
insurance –every
Manage – Information Models provide Banking Key Performance bank should use
Indicators to manage deployed processes
them.”
Jeff Wolfers
Head HSBC Group
Technology

More than 400 clients benefiting from IBM Industry Models
Not a complete list
“Seven of the world’s top ten Insurers and top three banks are using the
industry models in various facets of their business-driven IT strategies!”

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IBM Software Group – Industry Models and Assets Lab

Best Practices Models for Banking

© 2007 IBM Corporation

 Introduction to the IBM Banking Industry Models

 Overview of Use of Models in Development Lifecycle

2 © 2008 IBM Corporation

The Information FrameWork (IFW)

IFW PROCESS MODELS:

3 © 2008 IBM Corporation

Financial Services Data Model

IFW DATA MODELS IFW PROCESS & INTEGRATION

BDWM IFW PROCESS MODELS

Arrangement ARRANGEMENT CUSTOMIZATION

ARRANGEMENT LIFECYCLE STATUS Potential Arrangement

4 © 2008 IBM Corporation

 Legacy application audit of data content

 Legacy application integration improvement

 Precise project scope of new data requirements, reducing project

 Higher quality ISV vendor selection, as independent of technology

 Core system development

6 © 2008 IBM Corporation

Financial Services Function Model

IFW DATA MODELS IFW PROCESS & INTEGRATION

BDWM IFW PROCESS MODELS

Scope of an Existing Application

ARRANGEMENT MANAGEMENT ARRANGEMENT ACCOUNT ADMINISTRATION

COLLATERAL MANAGEMENT COLLATERAL MONITORING

7 © 2008 IBM Corporation

8 (1). LDE = Labour days of effort.

Benefits of Financial Services Function Model

 Enables tool for quantitative cost control of development of

 Mergers and acquisitions; provides neutral tool to perform analysis

 Rapid standardized analysis of ISV packages, or legacy applications

9 © 2008 IBM Corporation

Financial Services Workflow Model

IFW DATA MODELS IFW PROCESS & INTEGRATION

BDWM IFW PROCESS MODELS

EXPANDABLE OBJECT OBJECT ACCEPTANCE ACTIVITIES

OBJECT DETAILS Administer * Details

10 © 2008 IBM Corporation

IFW Process Models

 1840 defined process tasks / activities!

AST FS-IDM  Optimized to start from maximizing

ARRANGEMENT NEGOTIATION PROVIDE LOAN ARRANGEMENT OFFER

ACTIVATE LOAN ARRANGEMENT

REVIEW OFFERED ARRANGEMENT STATUS

PROVIDE ARRANGEMENT PROPOSAL

11 © 2008 IBM Corporation

The IFW Process Models

 Analyze and design optimal, reusable and consistent “To Be”

 If you don’t start from this level of independence, it is impossible to

12 © 2008 IBM Corporation

Why Customers Model

 Modeling for redesign

 Modeling for execution

13 © 2008 IBM Corporation

How we present to lines of business

One or more long running processes occur within a single chevron.

Identify Verify Establish Maintain Service Terminate

Operational, Credit & Market Risk Management

Monitoring, Control and Customer Insight

14 © 2008 IBM Corporation

Sales & Relationship Management (Customer, Supplier, Employee)

Introduction to the IBM Banking Industry Models

Overview of Use of Models in Development Lifecycle

Legacy application audit of data content

Legacy application integration improvement

Precise project scope of new data requirements, reducing project

Higher quality ISV vendor selection, as independent of technology

Core system development

Enables tool for quantitative cost control of development of

Mergers and acquisitions; provides neutral tool to perform analysis

Rapid standardized analysis of ISV packages, or legacy applications

1840 defined process tasks / activities!

AST FS-IDM Optimized to start from maximizing

Analyze and design optimal, reusable and consistent “To Be”

If you don’t start from this level of independence, it is impossible to

Modeling for redesign

Modeling for execution

Model – Best practice Process Models available in WebSphere