Asset management with SAS® Risk Dimensions: An integral part of capital investment management in the Allianz Group

IDS GmbH - Analysis and Reporting Services (IDS) is a wholly owned subsidiary of Allianz AG. The Munich-based company, which employs around 70 people, specializes in the provision of investment management services, covering the capital investments of both the Allianz Group and external customers. IDS operates and maintains a financial database containing data on all the capital investments managed by the Allianz Group worldwide and delivers performance and risk measures and other finance-specific evaluations.

A flexible, scalable solution
Identifying, measuring and controlling risks are amongst the core skills of any financial services provider. Alongside insurance-specific risks, risks arising from the capital market are particularly important. The Allianz Group therefore carries out extensive investment management for the assets of its insurance companies, as well as asset management for the capital investments with which it has been entrusted, including dedicated risk analysis and performance measurements. IDS takes on these tasks as a central service-provider on behalf of Allianz.

Recently, IDS looked for a flexible solution that would enable them to identify changes in the capital market even more quickly, allowing fast and efficient implementation of specific requirements. In the face of increasing globalization and their own expansion strategy, the company wanted an extremely scalable solution which could be expanded easily and smoothly, as required. To solve these issues, IDS chose the SAS Risk Dimensions solution.

Consistent risk evaluation and fast reporting
The new risk management system at IDS, based on SAS Risk Dimensions, allows for the loading of current market, position and dimensional data into a central SAS data warehouse for investment management. Data loading includes, among other things, daily updates of market data on more than 3,000 equities and equity indices and of portfolio data on more than 250 different portfolios with a total of over 10,000 different investment positions. On the basis of these data, the system automatically carries out Value-at-Risk (VaR) calculations regularly.

Receiving specific inquiries at short notice, the risk experts at IDS can now set up and carry out these calculations quickly themselves, thanks to the efficient usability and manageability of the SAS application. In addition to the daily standardized risk calculations they can, for example, analyze unusual market events and carry out any type of scenario analysis on an ad hoc basis. To set up these ad hoc analyses, input variables upon which the standard evaluations are based can be altered easily. To calculate the risk exposure, SAS Risk Dimensions accesses a financial pricing library containing the evaluation functions to determine prices of all relevant financial instruments. The results of the SAS Risk Dimensions-based simulations are then read back into the IDS financial database.

Project milestones
The implementation was done in cooperation between SAS Professional Services and IDS. After an initial assessment of customer requirements, SAS consultants designed and built a referring prototype. By means of the prototype, which went live just six weeks after the start of the project, the future users of SAS Risk Dimensions at IDS were able to familiarise themselves with the planned solutions on a practical basis at an early stage and test it while monitoring their requirements. In this way, their business requirements could be continuously integrated into the ongoing development process. This on-going review of both business requirements and their implementation is an integral part of SAS Professional Services’ best practices. The complete project was implemented and deployed within a period of less than four months.

From the first project kick-off meeting until user acceptance, the delivery of the project by SAS Professional Services proceeded reliably by both meeting project timelines and estimated project budget. In fact, SAS and IDS are now working towards expansion of the project scope to incorporate new functionality such as extreme value statistics, dynamic portfolio allocation and incorporation of proprietary risk models.

The benefits of using SAS Risk Dimensions:

• With the new extended analytics functionality based on SAS, it is easier for IDS to examine the global investment portfolios of the Allianz Group in greater detail.
• A full range of simulations and complex scenarios can be set up and carried out quickly and easily.
• The SAS solution anticipates potential future technical enhancements, business requirements and scalability.
• The SAS risk management system is directly embedded in the IDS data warehouse – keeping investments to a minimum by leveraging on existing legacy systems.
• Evaluation of risk measures such as VaR can be done by three alternative methodologies: the Delta-Normal method, historical simulation and the Monte Carlo simulation, which, for example, allows for methodological comparisons and studies.

Copyright © SAS Institute Inc. All Rights Reserved.