Risk management house of the year: Credit Suisse

Structured Products Europe Awards 2015: The implementation of Credit Suisse’s Giraffe risk management system is now well advanced, boosting the bank’s capabilities and increasing efficiencies across its structured products business

Olivier Charhon, Credit Suisse

By the end of this year, Credit Suisse's entire global equity derivatives and fund-linked products businesses will be running on its Giraffe risk management platform, in a roll-out that began three years ago as part of a strategy to unify the bank's risk management and trading systems.

Even before all business segments have been added to the platform, currently more than 35,000 derivatives products are valued on Giraffe for the Europe, Middle East and Africa portfolio. The ultimate goal is to run the bank's entire global equities franchise on the platform by 2017.

It couldn't have come at a more opportune time. The monitoring and reporting requirements for banks with a global reach have been intensifying in recent years around the world. In Europe alone, banks now have to aggregate risk data for balance-sheet purposes as part of the European Union's capital requirements regulations.

The Basel Committee on Banking Supervision updated its set of principles covering corporate governance for banks in July this year, which requires them to have accurate internal and external data to identify and mitigate risk and determine capital and liquidity adequacy. Needing to be flexible enough to adhere to differing regional requirements, while also putting in place cost-effective standardisation is a tricky conundrum that Credit Suisse's platform is helping the bank to solve.

Credit Suisse made the decision to link what had previously been a fragmented collection of risk systems in 2010 in a bid to boost market and reporting efficiencies and to cut costs. Everything has been designed to provide the utmost flexibility, which will prove a vital time-saver as new reporting and monitoring requirements take effect in the coming years.

We’re able to have both an extremely small and fast product test-and-release cycle, all of it automated and all of it extremely well engineered

The Giraffe team consists of around 30 IT developers, supported by project managers, business analysts and the equity derivatives quant team. The system is highly federated across a coalition of standalone services

"We wanted to achieve three things: first, to be able to respond to business requirements more efficiently; second, to respond to risk-related demands from the regulators; and third, to reduce the costs of supporting several platforms and the waste of effort in terms of duplicating work across those systems," says Olivier Charhon, chief risk officer for Europe, the Middle East and Africa, and platform lead at Credit Suisse in London.

In order to combine both unity and flexibility, the bank chose to develop a system using open-source, test-driven development, non-relational (NoSQL) databases and grid computing. The use of open-source coding means system additions can be made quickly and easily, while using NoSQL allows data to be saved and recalled irrespective of format.

"When people asked me if a NoSQL solution would scale, I'd say that if Facebook can keep scale with it then we can. Although we talk about off-the-shelf or in-house IT solutions, we went for an approach where you don't really buy or build. We use open source," says Kevin Peel, Giraffe technical lead at Credit Suisse in London.

One major advantage of all of this computing power and flexibility is that the bank can now develop, test and release risk management architecture around complex products much faster than before, says Zohar Melamed, London-based equity derivatives chief technology officer at Credit Suisse.

"We live in a world today where if you can't support a product in risk management systems, you can't trade it. We're able to have both an extremely small and fast product test-and-release cycle, all of it automated and all of it extremely well engineered. In the five years we've been building the system, we were able to maintain a consistent speed even as it grew, whereas usually systems slow down as applications are added," says Melamed.

Regulatory reporting demands are at their most intense at the end of each month and quarter, says Peel, with the burden set to increase as new measures are implemented. With this in mind, the bank will soon go live with a project that will run some operations through a public cloud-computing provider when needed. This will allow Credit Suisse to dynamically grow its computational capacity as required.

The ability to purchase extra power during times of stress enables the bank to stretch the capability of the platform to meet the demands of regulators without spending millions of dollars on capacity that would remain unused for much of the time.

"Risk management systems are at the centre of our entire front-to-back infrastructure. By rolling out Giraffe, we save costs not only on the front-office risk management system, but also front-to-back by streamlining our shared services architecture and processes," says Charhon.