SAMPENSION gets the best of both worlds with SimCorp Dimension’s Risk Management solution
Find out how SAMPENSION reduced dependency on in-house development and keept the advantages of an STP solution without compromising on functionality.
To learn more about this win-win situation, SimCorp has interviewed Mads Smith Hansen, Chief Operating Officer and head of Middle Office in the SAMPENSION Investment Department. It is the responsibility of Middle Office to support portfolio managers in Front Office with analysis and reporting, for example daily measurement and reporting of market risk.
Challenge to be faced and opportunities to be considered
In the summer of 2007, SAMPENSION realised that in order to stay a market leader within risk management on the Danish pension market, they would need a longterm software solution to match and support their highly advanced in-house built risk management setup. To deal with this challenge, SAMPENSION decided to consider and analyse three opportunities simultaneously:
- to extend the engagement with SimCorp
- to select a third-party system
- to extend in-house development
Solution
Having data stored in SimCorp Dimension already, it was natural for SAMPENSION to turn to SimCorp to discuss the first option. SAMPENSION met with representatives from SimCorp and, as previously, SAMPENSION experienced a dialogue with a professional and trustworthy business partner.
Meanwhile, the third option was rejected as SAMPENSION did not wish to build and maintain a department of a size sufficient to handle software development and maintenance. With regard to the second option, a number of third party systems were reviewed. However, as they would all require interfacing from the present SimCorp Dimension platform, and as SAMPENSION would be dependent on external data and/or methodology for further interpretation of results, this option was also rejected.
Further discussions with SimCorp led to an agreement in November 2007 to acquire the recently developed SimCorp Dimension Risk Management solution. This solution ensures the fulfilment of demands from SAMPENSION for both functionality and reduction of dependency on in-house development by moving the internal setup to an externally developed and maintained platform. Additionally, this integrated SimCorp Dimension risk solution enables SAMPENSION to reduce operational risk while ensuring full coverage of assets as well as transparency of risk measures.
The SimCorp Dimension Risk Management platform will support SAMPENSION’s continued coverage of a universe of approximately 60 risk factors (index, interest rates, spreads, FX, volatilities) and ability to perform both Parametric VaR and Monte Carlo simulations. The solution will also fulfil daily reporting requirements and demands for transparency in the system, at the most detailed level. At the same time, SAMPENSION will stay in charge of 
data used in their risk model as well as achieve a solution ensuring coverage of the wide variety of assets in their portfolios. Through integration on one single platform, data consistency across the system is ensured in terms of positions, market data, static data, pricing etc.
To demonstrate its commitment of delivering a reliable solution, SimCorp together with SAMPENSION has performed a successful test of risk calculation already in December 2007. These tests included correlation matrix calculations covering risk factors which applied to around 85% of total holdings. The remaining 15% and specialities was implemented and finalised by Summer 2008.
The future
Turning to the future, Mads Smith Hansen ends our interview explaining that SAMPENSION intends to work towards an integrated solution for risk and performance to ensure that the right matching is made between risk and performance data. The integration is in line with SimCorp’s vision for a Middle Office solution and experts are already working on its realisation.
