Oracle Financial Services Software Limited, majority owned by Oracle, is a world leader in providing IT solutions to the financial services industry. With its experience of delivering value based IT solutions to global financial institutions, Oracle Financial Services Software understands the specific challenges that financial institutions face: the need for building customer intimacy and competitive advantage through cost-effective solutions while, simultaneously, adhering to the stringent demands of a dynamic regulatory environment.
Their mission is to enable financial institutions to excel through the effective use of information technology. We offer financial institutions the world's most comprehensive and contemporary banking applications and a technology footprint that addresses their complex IT and business requirements.
Together with Oracle, we offer a comprehensive suite of offerings encompassing retail, corporate, and investment banking, funds, cash management, trade, treasury, payments, lending, private wealth management, asset management, compliance, enterprise risk and business analytics, among others. With a process-driven approach for service-oriented architecture (SOA) deployments, we offer banks the combined benefits of interoperability, extensibility, and standardization. We also offer best-of-breed functionality for financial institutions that need to operate flexibly and competitively and respond rapidly to market dynamics in a fiercely challenging business environment. Oracle Financial Services Software has serviced over 1,000 customers in more than 135 countries through its portfolio of products and services.
We have two major business segments - the products business (comprising product licensing, consulting and support) and consulting services (comprising IT application and technology services). We also have a smaller business segment that offers business process outsourcing services to financial institutions.
These segments are described in detail below:
Products
Oracle FLEXCUBE
Oracle FLEXCUBE is a complete banking product suite for consumer, corporate, investment, private wealth management, mobile and internet banking, consumer lending, asset management and investor servicing, including payments. Oracle FLEXCUBE enables banks to standardize operations across multiple countries, transform their local operations as well as address niche business models like direct banking, Islamic banking and mobile banking. Financial institutions use Oracle FLEXCUBE to respond faster to market dynamics, define and track processes, while ensuring compliance.
Oracle FLEXCUBE release 12 enables banks to meet the demands of the new age customer by delivering a portfolio-driven customer relationship using a combination of enhanced self-service and assisted support. The new version includes features that enable banks to deliver more personalized and convenient service to customers across all channels. The knowledge worker in the bank is enabled across channels with advisory tools with intelligence giving enterprise-wide 360-degree customer view, an in-built interaction framework to drive user behavior. They are also assisted in aligning to the branch and personal goals through role-based dashboards with alerts and reminders.
Oracle FLEXCUBE release 12 offers a harmonized infrastructure and open development tools that allows more flexible deployment options and upgrade paths. Oracle FLEXCUBE release 12 gives financial institutions the power to redefine the banking experience and deliver a 'personal banker' experience to customers. It gives bankers the intelligence needed to truly understand customers and their interaction with the institution and the flexibility to deliver a highly responsive, personalized experience and robust-transaction capabilities regardless of the customer's location.
Oracle FLEXCUBE Enterprise Limits and Collateral Management
Oracle FLEXCUBE Enterprise Limits and Collateral Management offer a single source for managing exposure across a business portfolio. It enables centralized collateral management, limits definition, tracking and exposure measurement for effective exposure management and resource utilization.
Oracle FLEXCUBE Private Banking
Oracle FLEXCUBE Private Banking is a comprehensive solution for private banking. It gives wealth managers a unified view and analyses of their customers' wealth across asset classes, and provides the added benefits of performance tracking and improved customer relationship management. The application is a comprehensive, customer centric solution that offers a wealth management portal, a customer interaction tool, and portfolio management capabilities - all of which can be integrated with the existing core banking solutions used by a bank.
Oracle FLEXCUBE Investor Servicing
Oracle FLEXCUBE Investor Servicing is a process enabled transfer agency and investor servicing solution. It helps financial institutions manage the complete fund lifecycle and reduce operational costs through process automation across fund structures, intermediary hierarchies, and investors. The ISO 20022 and 15022 compliant Oracle FLEXCUBE Investor Servicing ensures enhanced STP processing through support for a wide variety of SWIFT NET 4.0 messages. With a comprehensive business rules engine for products - hedge funds, mutual funds and investment linked products, funds, and fee structures, Oracle FLEXCUBE Investor Servicing allows fund management companies to configure and launch new products rapidly.
Oracle Financial Services Leasing and Lending is a family of products provides functional coverage across lending, leasing, and mortgage lifecycles for consumer, commercial, syndicated, Islamic, and SME functions. The solution supports the complete business lifecycle across origination, servicing, and collections and enables financial institutions to provide better service and minimize delinquency rates through comprehensive and flexible processing of booking, disbursement, and payment. It centralizes origination functions, enabling them to improve customer experience and reduce transactional overheads.
Oracle Financial Services Analytical Applications
Oracle Financial Services Analytical Applications are a complete and fully integrated portfolio of analytical solutions covering enterprise risk, performance management, regulatory compliance and customer insight. They are built upon a shared analytical infrastructure consisting of a unified financial services data model, shared analytical computations and the industry leading Oracle Business Intelligence platform.
The suite of applications contains comprehensive set of point solutions that can be integrated to give a holistic view across all analytical applications. Financial institutions need an integrated approach that combines a diverse set of compliance and risk solutions to help them address not only present regulatory needs, but also emerging and future risk and regulatory requirements. The framework is rules driven, and readily adapts to change. Unlike other hard coded solutions, Oracle Financial Services Analytical Applications provide both prebuilt rules and the capability to create and modify rules. This flexibility allows financial institutions to easily create custom rules for their own analytical requirements and to cost effectively address ever changing compliance regulations. Any rule can be viewed and audited for its underlying definition to enable supervisory oversight.
Services
Oracle Financial Services PrimeSourcing
Oracle Financial Services PrimeSourcing is the consulting arm of the Company. It offers end-to-end consulting services, providing comprehensive business and technology solutions that enable financial institutions to improve process efficiencies, optimize costs, meet risk and compliance requirements, define IT architecture, and manage the transformation process.
With a singular focus on Financial Services vertical, PrimeSourcing has proven domain expertise across Capital Markets, Private Banking, Global Wealth Management, Corporate Banking and Retail Banking. The value based offerings from PrimeSourcing are designed to provide specialized application & technology services for Banking & Financial Services in areas such as Access Channels, Risk Governance & Compliance, Payments, Business Intelligence and product related surround services cutting across domains.
PrimeSourcing Consulting Services
PrimeSourcing offers end-to-end consulting services in the areas of Business & IT consulting and process improvement and transformation, Quality Consulting, SOA Strategy & Governance, IT Architecture Planning, Product Evaluation & Selection, IT Portfolio Assessment, program management, IT architecture and governance.
PrimeSourcing Application Services
PrimeSourcing provides comprehensive customized IT solutions for banking, securities and insurance those encompass the complete lifecycle of an IT application asset from conceptualization to creation and maintenance. This includes the expertise around specialized practice lines like payments, trade finance, and business intelligence, CRM, Oracle Technology and Applications and testing; services include ADM Services, Testing, System Integration, implementation and Migration.
PrimeSourcing Technology Services
PrimeSourcing offers expertise in conceptualization, design, evaluation, implementation and management of IT infrastructure for financial institutions under two service lines. First line is of Technology Management Services, covering Data Management, Mainframe Services, Application Deployment, Monitoring & Management and Risk & Security Assessment. The second service line is of Remote Infrastructure Management where PrimeSourcing manages remotely monitors and supports customer's applications and infrastructure providing them economies of scale, arbitrage benefits while keeping the best in class processes.
Oracle Business Process Outsourcing Services (BPO)
BPO offering excels in providing cost effective and high quality BPO services ranging from complex back-office work to contact centre services for the banking, capital markets, insurance and asset management domains. This comprehensive ecosystem of BPO services also draws upon software applications such as Oracle FLEXCUBE and is backed by a mature process and consulting framework.
BPO offering was selected in the Leadership Category for the '2010 The Global Outsourcing 100'. The Outsourcing Centre short listed it to be amongst 2010 Finalists for its Outsourcing Excellence Awards. The BPO offerings are ISO 9001 certified for quality management and ISO 27001 certified for information security management.
Oracle sees demand for core banking applications continuing as banks expand by buying the assets of other banks, establish presence in new countries or standardize applications across regions. Banks are looking at the centralization of banking services such as account opening and origination of credit to improve their service levels, increase productivity and gain greater control over processes that are subject to regulatory scrutiny.
Global regulators have re-emphasized the importance of stress testing in the measurement of liquidity and credit risk and in evaluating how banks would fare under different scenarios. As a result of these factors we have gained increasing traction at Tier 1 banks for our products. Banks have also exhibited renewed interest in aligning finance, risk and performance applications.
Oracle Financial Service Software is an acknowledged leader in the banking space and is committed to maintain its leadership position in financial services. Oracle Financial Service Software will continue to invest in expanding its banking footprint through its own internal R&D.
With a process driven approach based on service oriented architecture, your Company has the distinct advantage of offering banks the combined benefits of interoperability, extensibility and standardization. Together with Oracle we provide a complete banking footprint, spanning all major distribution, manufacturing and corporate administration functions.
Internal control systems and their adequacy
Oracle Financial Services Software group has in place adequate systems for internal control and documented procedures covering all financial and operating functions. These systems are designed to provide reasonable assurance with regard to maintaining proper accounting controls, monitoring economy and efficiency of operations, protecting assets from unauthorized use or losses, and ensuring reliability of financial and operational information. The group continuously strives to align all its processes and controls with global best practices.
SWOT analysis
Strengths:
Acknowledged leadership in core banking, application services and Analytics Solutions (governance, risk and compliance, customer insight) and process outsourcing
Superior quality and cost efficient, end to end service capability from business consulting to application development and deployment, IT management to Business Process Outsourcing
Unmatched solutions portfolio with depth of offering in the retail, corporate and investment banking, funds, cash management, trade, treasury, payments, lending, private wealth management, asset management and business analytics
Extensive global client base
Deep domain expertise with proven track record
Solutions built on best in class technology and architecture
High quality manpower resources
Strong R&D capability with strong balance sheet.
Weaknesses:
Exposure to various economies
Local resources in new markets.
Opportunities:
Penetrate major markets like US, China, Brazil, Japan, North America, Russia, and Latin America
Develop strong global partner model, greatly expanding pipeline and delivery capabilities
Provide integrated offerings on the Oracle technology and solution portfolio especially to tier-one financial institutions
Increasing momentum in the acquisition of core banking systems by large and global financial institutions
Cross-sell and up sell opportunities into global customer base.
Threats:
Economic slow down
Potential delays in decisions due to economic uncertainties
Geo political factors
Competition footprint in high growth geographies.
Treasury Operations of OFSS
The central function of treasury department is fund management and management of financial risks. But the primary objective of the foreign currency treasury operations is to hedge the exchange rate risk; the key objective of surplus funds in short term fixed deposits with approved banks.
The functions are further broken down mainly into Investment and Maintenance. Each of these functions is further sub-divided into Indian rupee and Foreign Currency.
The activities undertaken by the treasurer would include:
Managing Cash/Bank Operations
Investment in Fixed Deposits
Forward Contracts
A substantial portion of their revenues is generated in foreign currencies while a majority of the expenses are incurred in Indian Rupees (INR), with the remaining expenses are incurred in US Dollars (USD) and European currencies.
Their philosophy for treasury operations is conservative and they invest funds predominantly in time deposits with well-known and highly rated Indian and foreign banks. The Company has ensured adequate internal controls over asset management, including cash management operations, credit management and debt collection.
The Company also maintains funds in USD, EUR, GBP and INR accounts based on comparative exchange rates, interest rates and currency requirements.
Investment in Fixed Deposit
Investments in Fixed deposits are based on surplus cash which is identified based on estimated cash inflow and outflow.
The guiding principles require monitoring of the deposit of any one bank and for each investment decision; the following analysis is submitted to the CAO/CFO for the decision and approval.
Amount proposed to be invested and tenure (generally 181 days)
Comparison of the rates quoted by various banks
Ratings given by Credit ratings agencies
Scenario of overall exposure to the bank pre and post the transaction
Investment in Fixed Deposit of Banks will be done based on interest rate analysis by the treasury team of minimum four of any banks with whom they have banking relationship.
Procedure for investment in Fixed Deposit
The treasury team member compiles a comparison sheet mentioning the interest rates as quoted by different banks for approval to the CAO or CFO as applicable.
On the receipt of the approval for name of the bank and tenure for which Fixed Deposit is to be placed the member from the treasury team would go ahead to process the Fixed Deposit.
Process for booking Fixed Deposit
Issuing instructions to the bank to debit the account only by the authorized person
Receipt of Acknowledgement by Bank
Updating the excel tracker with the date of booking, amount in rupees, period (tenure), date of maturity, etc.
Verifying the Fixed deposit receipt
Accounting of the each FD transaction
Documentation
The Fixed deposits transactions are tracked and monitored on excel spreadsheet-namely 'Fixed Deposit Register' (for format please refer to Appendix-II) by the member of the treasury team. The treasury team member ensures that each month end the register is updated and tallied with General ledger and Bank statement. On quarterly basis the same is tied up with Bank confirmation
Information is entered to include FD no. principal amount, interest rate, date of deposit, maturity date and the period of FD.
Every month end the member of the treasury team tallies the interest income/accruals per the trial balance to the Excel Control Sheet to ensure proper recording of interest income/accruals. All differences between Bank confirmation and Interest accrual as per General ledger is documented on excel sheet and informed to statutory auditors quarterly and on year end audits. The custody of the Fixed Deposits receipt would be with the treasurer. The records for the Fixed deposits are maintained in such a manner that the same are easily retrievable.
Risks and concerns
Quantitative and Qualitative Disclosures about Market Risk
Their primary market risk exposures are due to the following:
Foreign exchange rate fluctuations
Fluctuations in interest rates.
As of March 31, 2012, OFSS had Cash and Bank Balances of Rs. 39,475.9 million out of which Rs. 34,890.3 million was in interest-bearing bank deposits. Consequently, they face an exposure on account of fluctuation in interest rates. These funds were mainly invested in bank deposits of longer maturity (more than 90 days) to earn a higher rate of interest income.
Their functional currency for Indian operations and consolidated financials is the Indian Rupee. They expect that the majority of their revenues will continue to be generated in foreign currencies for the foreseeable future and a significant portion of their expenses, including personnel costs and capital and operating expenditure, to continue to be incurred in Indian Rupees.
In addition, they face normal business risks such as global competition and country risks pertaining to countries that they operate in.
Techniques for Minimizing Hedging Risks
Leading and Lagging:
Leading implies collection from debtors expeditiously foreign currency designated before due date and to initiate lead to pay foreign currency designated creditors before their due date of payment.
Lagging implies is delaying receipt from foreign currency designated receivable whose currency is are likely to appreciate and delaying foreign currency designated payable whose currencies are likely to depreciate. This makes financial sense on account of more receipt from debtors and less payment to creditors.
Therefore to receive maximum receipt or make minimum payment, in appreciation-prone countries, account receivable are collected as soon as possible and payment of accounts payable is delayed as long as possible
Invoicing or Billing in the desired currency:
Invoicing sales as well as purchases in the home currency is an idle method of Hedging foreign exchange risks. Billing in home currency enables the firm to know the precise amount it is likely to receive from sales (EXPORT) and likewise the exact amount it is to pay for purchase (IMPORT) as a result, its foreign exchange risk is completely eliminated.
Although the method provides a natural Hedge, it may not be operationally feasible to be used always and by all firms. Only firms having high demand for their products across the worlds and those having products with low price elasticity, say petroleum products or with low complication or with less substitutes available
Indexation clauses:
Another technique of hedging risks is to provide clause related to the export and import of goods and services between the two parties in contract. Obliviously the terms and the conditions included in the contract depend on the bargaining strengths of the involved parties. For instance the exporter may be in a better bargaining position to include a clause in a contact whereby prices are to be adjusted in such manner that the adverse moment of foreign exchange rates is to be absorbed by the imported alone.
In a contrast, if the buyer/importer happens to be in strong bargaining position he may succeed in perusing the exporter to have a clause where by price are to be adjusted downwards to absorb losses due to unfavorable moment of exchange rate
Sharing Risks:
The indexation clauses illustrate the extreme passions / situations in which the entire incidents or loss of the unfavorable foreign exchange risk is shared by one of the parties only. In practice, the two parties may stipulate that loss incurred during the intervening period is to be shared between them in predetermined proportion. Risk sharing techniques may be appropriate when the currencies involved in the business deals are subject to abnormal rate of changes. Who bears a higher loss will depend on bargaining position of the two parties.
Derivatives:
The basic types of Forex and equity derivatives are forward and futures contracts, Options (calls and puts) and Swaps. Among these instruments forward contracts are more cost-effective for hedging foreign operations risk mainly used by many Corporations.
Forwards: A forward is a made-to-measure agreement between two parties to buy/sell a specified amount of a currency at a specified rate on a particular date in the future. The depreciation of the receivable currency is hedged against by selling a currency forward. If the risk is that of a currency appreciation (if the firm has to buy that currency in future say for import), it can hedge by buying the currency forward. The main advantage of a forward is that it can be tailored to the specific needs of the firm and an exact hedge can be obtained. On the downside, these contracts are not marketable, they can't be sold to another party when they are no longer required and are binding.
Appendix 1 summarizes other currency hedging instruments.
