Source: BBC News website Sep 14, 2009

1. “There are some in the financial industry who are misreading this moment,” said President Obama in a speech to mark one year since the collapse of Lehman Brothers bank. “Instead of learning the lessons of Lehman and the crisis from which we are still recovering, they are choosing to ignore them. They do so not just at their own peril, but at our nation's.” President Obama said his administration was working on an “ambitious” overhaul of the regulatory system. Under the proposed regulation, the White House would give the central bank, the Federal Reserve, new powers over huge financial firms and the ability to seize banks whose collapse could threaten the economy. He also wants a new watchdog, the Consumer Financial Protection Agency, to oversee products such as mortgages, car loans and credit cards. The Federal Trade Commission would also be given new powers to protect consumers. Source: BBC News website Sep 14, 2009

2. Let’s Build a Smarter Planet: Financial Services Douglas Coombs Information On Demand Advocate

3. The world is smallerandflatter.

4. Sophistication has outstripped our ability to handle it. Together government and industry must balance stability and innovation. To thrive, firms must innovate their business models. Daily interactions must deliver on brand promises. The reality of living in a globally integrated world is upon us. The world is connected: economically, socially and technically.

6. The need for progress is clear. 50% 93% 25 billion Percentage of customers who would give their bank only two chances to failbefore considering a change in banks. of the 285 million electronic attacks in 2008 were focused on the finance sector, well over half detected by third parties. Global trading systems are under extreme stress, handling billions of market data messages each day.

7. The opportunity for progress is clear. 90% reduction in manual process $1M in fraud eliminated each month 21x more messages Streamlined operations:Bank of New York Mellon The bank streamlined operations to achieve a 90% reduction in manual touch points in the check-clearing process—cutting processing errors and required remediation. Large US Retail Bank: Financial Crime On the second day of production, the new system prevented a single $500k fraudulent transaction, an additional $733k of fraudulent activities in the first month and $1M on a monthly basis. Automated trading:TD Bank Financial Group IBM developed a first-of-a-kind system capable of consuming, analysing and acting on real-time market data while maintaining sub-millisecond response times even under extreme data loads.

8. The way the world works is changing—and financial services organisations must deliver on brand promises Percent of providers that understand what clients value 21% Organisations that rank themselves as ‘moderate’ to ‘poor’ in business and technology agility 67% Brand Promise Client-centricity Agility Stability Interaction Reality Firm-centricity Complexity Volatility 90% Of executives believe the returns of the past are over, and that returns will be more sustainable Source: IBM / CFA Institute Survey 2009; IBM Institute for Business Value analysis

9. The returns of the past are gone and business models are changing. Capital constraints demands three imperatives for financial services firms now: 1 2 3 CLIENTS • Insight • Develop client analytics and new segmentation schemes • Orient offerings for the unbundled landscape • Optimise client channel interactions • Attract and retain specialised skills Confidence • Leverage transparency initiatives • Re-establish the brand • Deliver client centric offerings • Turn clients into advocates AGILITY Cost base • Evaluate headcount and compensation • Rationalise recent mergers and acquisitions • Streamline operating model • IT modernisation Partnerships • Reduce the IT/business disconnect • Standardise vendors • Outsource non-core components • Connect to new utilities RISK • Exposures • Create a risk-based culture • Improve governance models • Ensure comprehensive, accurate and timely data • Address risk models, scenarios, stress testing and model input weaknesses Transparency • Eliminate barriers to fine grain reporting • Address gaps preventing timely enterprise wide views • Proactively engage regulators & shareholders

10. To ensure their own survival as well as the economic well-being of clients, stakeholders and the public at large, smart financial services organisations are working to… DEVELOP NEW INTELLIGENCE Eradicate information silos and create an enterprise view that supports new models for intelligent business decisions. Create a single customer view to drive advocacy and profitability. SIMPLIFY AND STREAMLINE Radically simplify architectures to yield business agility while eliminating inefficiencies across the enterprise. Enable rapid assembly of services to drive innovation at every point in the value chain. FINANCIALSERVICES INTEGRATE RISK MANAGEMENT Understand the interdependencies of your financial exposure. Align it continuously with your business and prudential objectives. Mitigate operational risks and financial crime. Turn regulatory compliance into competitive excellence.

11. Financial institutions must restore trust and confidence in the global financial system. They will use transparency as a means to mitigate risk and as an engine for growth.Success requires people and process improvements that include new and smarter ways of measuring, modeling and applying information.

12. Smart financial institutions are doing so by becoming instrumented, interconnected and intelligent.

13. INSTRUMENTED We now have the ability to measure, sense and see the exact condition of everything. Today, there are 1 billion transistors for each person on the planet. By 2010, 30 billion RFID tags will be embedded into our world and across entire ecosystems. Approximately 89% of the U.S. money supply exists entirely in electronic form. A smarter financial system stipulates that products are decomposed and managed at the atomic level, allowing the participants to measure, control, sense and respond quickly and precisely based on a “single source of truth.”

14. INTERCONNECTED People, systems and objects can communicate and interact with each other in entirely new ways. The Internet of people is 1 billion strong. Some 35% of online banking households will be using mobile banking by 2010. Increasing sophistication of mobile phones is bringingover 2 billion unbanked from the cash economy into the banking and microfinance ecosystem. The number of non-cash payments are estimated to exceed 110 billion by 2011, totaling more than $90 trillion. A smart financial institution is built on systems that advance processing to better automate transactions with counterparties, partners and suppliers to enable innovation across the value chain.

15. INTELLIGENT We can respond to changes quickly and accurately, and get better results by improving insights distilled from data in real time. Every day, 15 petabytes of new information are being generated. This is 8x more than the information in all U.S. libraries. Poor quality data will cost the banking industry$27 billion in operating costs. Banks mine 15 million transactions every day. A smart financial institution enables the rapid, intelligent analysis of a vast mix of structured and unstructured data to improve insight, enable informed judgment and fight abuse.

16. + + = An opportunity for financial services to think and act in new ways. Develop new intelligence to drive customer-centricity and improve business performance. Simplify and streamline to become more agile while reducing back-office costs. Achieve smarter integrated risk management— optimising financial and operational risk.

17. € Information is really one of only three forms of capital a Financial Services organisation can leverage … INFORMATION CAPITAL Structured and unstructured data and information is at once the raw material, work in process, and finished goods for the Insurance industry. It puts the Smart in Smarter…. HUMAN CAPITAL Human capital is a precious commodity that drives our business. It must be optimised as the talent pool gets shallower FINANCIAL CAPITAL More than ever, managing, monitoring, and optimising financial capital within the enterprise becomes an increasingly complex challenge

18. Drawing on marketplace insights and engaging customers as co-developers, a smart financial institution tailors products and services on demand and delivers them through an ever-evolving and increasingly interconnected set of channels. Bank location MOBILE BANKING MICROFINANCE ATM Phone SOCIAL NETWORKING POINT OF SALE AS ATM Point of sale Web Mail

19. OUTSOURCING GENERIC FUNCTIONS PRODUCT INNOVATION ARCHITECTURE RENEWAL AND IT RENOVATION PAYMENT CONSOLIDATION BUSINESSS AND FINANCIAL REPORTING RISK SYSTEMS INTEGRATION A smart financial institution is built around an optimised and integrated back office—one that leverages advancements in technology, global integration opportunities and a continuous flow of data to cut costs, drive speed and further innovation.

20. A smart financial institution must constantly absorb, measure and model large volumes of data from a wide array of sources. It must also apply this data quickly to ensure a streamlined, customer-centric experience. Derived data Customer & societal data Market data Products and services Risk data These data processing needs require a new approach to business intelligence.

21. The traditional approach to business intelligence has been to collect data in a single format, store it in a database and perform analytics on the data at rest. User query DATABASE Unique measurement, model or insight Fixed amount of structured data This approach can be effective – but not when massive volumes of data are involved, in so many formats, or real-time results required.

22. To capitalise on the vast quantities of information continuously generated in today’s marketplace and beyond, smart financial institutions are turning to a new business intelligence approach that can make sense—and use—of data in any format, in any volume, in real time. Infinite structuredand unstructured data Collection of relevant data CONTINUOUS ANALYSIS Detect, learn, predict, alert Model User queries Action Measurement

23. Plan, understand and optimise business performance Establish and maintain an accurate, trusted, single version of the truth Use information as part of business processes Manage information over its lifetime Driving an information based enterprise … Financial Risk Insight Customer & Product Profitability Workforce Optimisation Dynamic Supply Chain Multi-channel Marketing Business Optimisation Create Business Value Lower Costs

24. Information Guides & Workshops Business Value Assessment Competency Centres Foundational Tools Accelerators for industry solutions What is an Information Agenda ? • A Strategy - to provide trusted information • Enterprise-wide plan - to unlock information across silos • A methodology – an defined approach, tools, skills and solutions • Roadmap - identify, prioritise, coordinate and map challenges

25. An Information Agenda aligns business and IT. It is a shared strategy, based on a clear business case, and a committed roadmap Integrated program of projects capitalising on common enterprise information and technology Multiple highly justified but non aligned projects An information agenda helps transform information into a trusted strategic asset that can be rapidly leveraged across applications, processes and decisions for sustained competitive advantage.

26. SHIFTING BUSINESS AND OPERATIONAL MODELSIn an industry where keeping information proprietary has long been the secret to banks’ success and regulatory harmonisation was thought to be decades away, business as usual has proven to be unsustainable and, in many cases, destructive. PUBLIC DEMANDCitizens are demanding greater accountability for the stewardship of the financial system as well as greater regulatory participation in the effort to establish market discipline. EMERGING GLOBAL GOVERNANCEThe features of a global governance framework among regulators and supervisors are emerging. Banks and financial services firms can either change proactively or be forced into it. Take action now to balance financial stability with healthy financial innovation.

27. Aligning with the needs of financial services. FOR A FOCUS ON… IBM IS INVESTING IN… Delivering a client centric customer experience across all banking channels – while creating new intelligence and balancing the cost of information. Front office • Customer care and insight • Multi-channel transformation • Analytics and trading • Market data • Sales and client services • Trade and order management Achieving integrated risk management—optimising financial and operational risk. Integrated risk management • Financial risk • Financial crimes • IT and infrastructure risk • Governance and compliance Realising significant cost savings by simplifying, streamlining and smart sourcing. Back office • Data and process models • Master data management • Payments • Core systems transformation • Trade processing • Sourcing Addressing current capacity, future growth and flexibility with a holistic approach to all computing resources. Dynamic infrastructure • Energy efficient hardware, management and monitoring • Enterprise service and asset management • High performance computing • Cloud computing

28. We’ve only just begun to uncover what is possible on a smarter planet. The world will continue to become smaller, flatter and smarter. We are moving into the age of the globally integrated and intelligent economy, society and planet. There’s no better time to start building a smarter financial system—focused on restoring public and governmental trust and breathing new life into the global economy. Thank you IOD EMEA CONFERENCE ROME - May 19 – 21, 2010

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