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TALIC – INVESTMENTS
CONTENTS
A. OVERVIEW 3
B. CURRENT SET UP & CHALLENGES 4
C. PRODUCT SELECTION 5
D. COMPARISON BETWEEN M FUND AND SAP 10
E. BUDGETORY COMMERCIALS 14
F IRR CHALLENGES 16
G RISK OF IMPLEMENTATION 16
H TRAINING REQUIREMENT 17
I RESOURCE REQUIREMENT 17
J PROJECT PLAN 17
K PROJECT GOVERNANCE 18
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L SIGNOFF 19
A. OVERVIEW
To identify and procure an investment application that facilitates end to end investment solution from deal
requisition (for various asset classes) to NAV generation along with audit log for each activity carried out in
the application and also ensuring strong compliance rules, workflow with full efficiency and accuracy in
accounting and reporting.
The new application should be able to provide various set of reports required by Front, Mid and Back office
team. Whenever there is need of new set of reports, application should be capable enough to provide us the
reports in the required format or should have report writer available in the application itself empowering
users to setup new reports. Vendor to support in query writing for these reports additionally. Various asset
classes allowed by regulatory body should be made available in the new investment application as a part of
standard product and only configuration / implementation needs to be done so that users can start using the
same. It should be more efficient and user friendly than current application used by Tata AIA Life Insurance
Co. Ltd.
From time to time, IRDAI has come out with comprehensive guidelines on management of investment
operations and systems. Such guidelines have always laid importance that end to end activities should be
seamlessly integrated and ensure regulatory as well as internal compliance. All insurance companies go
through the IRDAI Investments Risk Management and systems audit after every alternate year as per the
regulatory (IRDAI) guidelines and in this audit procedure, auditor is required to certify that Investment
Management system is seamlessly integrated from Front office to back office and acts in the accordance
with all regulations set by the regulatory body along with reference to the technical guide issued by ICAI on
review of Investment risk management and systems. The focus of the guidelines is on end to end
integration and automation of all the activities pertaining to investment function. The main features
envisaged by various guidelines issued by regulatory body are as follows:
Investment front office and back office should be fully automated with seamless integration. There
should not be any manual intervention in data transmission from front office to back office.
The system should provide for maker – checker controls for all the activities.
All regulatory - reports should be automatically generated directly from the system.
The system should provide audit trail for each transaction at all levels.
NAV computation should be fully automated in the system.
Inter-Fund security transfer capability- There should be restriction on inter –fund security transfer
from Unit linked fund to non unit linked fund.
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All the regulatory limits set by IRDAI should be monitored by the system and any potential breaches
should be highlighted to the user. In addition system should not allow the user to enter any deals
which result in regulatory breaches
We are evaluating a shift from M Fund system to other solution and found SAP system solution
meeting our requirements.
B. CURRENT SET UP & CHALLENGES:
Currently Investment department is using MFUND application system for investment Front office – deal
requisition and placement, mid office - limits set up and monitoring & back office – operations, Valuation and
NAV calculation. There have been frequent & challenging regulatory changes/fresh requirements from the
regulatory side over last couple of years in the investments regulations as well as regulations impacting
investments functions, The current Investment system cannot be geared up to handle or implement these
changes due to challenges at OEM level. It exposes TALIC to the risk of regulatory breaches which may
invite the regulatory actions.
The key challenges in the Mfund applications are as follows:
The OEM has indicated that the current system used by TALIC will go out of support after two years,
mandating a change to new system either from the same OEM and any other OEM
There is strong need for better system requirement due to various changes took place in the industry
over time & current vendor is not able to keep the pace with these changes.
The support from the vendor has deteriorated over time making it very difficult to continue with
present set-up.
The current M Fund system does not cater to the various changes made by regulator time to time.
and the OEM is also not capable to within expected timelines. This incompetency lead to adverse
impact on fund performance.
In past, the system was unable to monitor & prevent limit breaches on certain instances, due to
stringent regulatory requirements, this may lead to the risk of regulatory action & reputation/financial
loss.
Support from the vendor has deteriorated due to high attrition rate at their end
(These challenges are well taken care in the proposed SAP system).
List of detailed challenges and limitations of M Fund system has been mentioned below in
comparative table along with offering from the proposed SAP system
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C.PRODUCT SELECTION 1) System Evaluation
We have evaluated the features of three investments management system such as
A) Empower system from Hexagon Technologies,
B) Mfund Plus system from 3i Infotech and
C) Bloomberg (available only for order placement & Execution)
D) SAP - Financial Asset Management (FAM) system
Our requirements are met with the SAP offering, SAP FAM system was considered for technical as
well as commercial evaluation.
Currently we have FICO and MM on SAP platform for our core accounting, with purchase of FAM
the system will be seamlessly integrated which is a challenge today, thereby avoiding any manual
intervention.
2) System Implementation partner : We have evaluated various partners of which Aegis limited is the most experience and have handled
successfully implementation of SAP FAM system in other insurance companies thereby TALIC will choose
Aegis Limited as implementation partner.
Brief Profile : Aegis Limited (An Essar Group Company)
Aegis Limited is Implementation Partner for SAP Financial Asset Management (Treasury Module).
Aegis Limited is an Essar Group Company Founded in USA with over 30 years in Customer Lifecycle
Management. The Employee strength is over 37000 globally in with presence in 37 global locations and
serving over 150 clients.
Key Engagements
• Banks
o Central Banks
o Corporate Banks
• Insurance Houses
o PSU Insurance Provider
o Private Institutions
• Corporate
o Steel, Oil & Power Major 5 | P a g e
o Alloys Manufacturer
Solution Offering
• Treasury and Risk Management o Liquidity management
o Portfolio and risk management
• Cash and Liquidity Management • In-House Cash
o Internal and external payments
o Minimizing external bank account and foreign payments
• Bank Communication Management o Seamlessly connect to bank
o Track the entire payment life cycle
• Value Added Services o SAP Treasury Implementation consulting
o Out of Box, IRDAI compliant reports
o Template approach for rapid implementation
o Business Benefit Analysis
In Banking & Financial Segment Aegis Limited has implemented SAP – FAM in.
Life Insurance Segment: Life Insurance Corporation of India, Star Union Dai-ichi Life Insurance,
General Insurance Segment: The Oriental Insurance Company,
General Insurance Corporation, Liberty Videocon General Insurance Company.
NBFC Segment: Shakti Finance, Aditya Birla Finance
Current Implementation in Process: ICICI Prudential Life Insurance Company Limited
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3) Hardware Sizing:
IOPS (DB<-> Storage) per sec. = 1300 (min.)
Assumptions1. SAPS: Hardware independent unit of measurement of CPU power for SAP applications, 100 SAPS is equivalent to 2000 fully processed order items per hour2. All servers will have a standard 2 *146 GB internal mirrored disks for OS, Kernel applications, SWAPs etc.3. External SAN storage is required for faster data access.4. Disk space for Quality and Development system can be Disks mounted on servers or DAS or anything else with minimum RAID 5 level configuration5. Redundancy at each hardware level should be considered as adequate to avoid any SPOF6. Suitable Backup software and Hardware should be proposed, (e.g. Backup server, SAN Backup Agents, Tape library with autoloader and adequate number of tapes)7. SAPS Rating for 65 % CPU utilization is required8. SAP Sizing is T-Shirt / User based 9. DR Sizing not covered in this document.
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Base SAPS at 65%
CPU
Recommended
SAPS at 65% CPU
Development Landscape SAP ERP System 2000 16 146 200
Quality Landscape
SAP ERP System 3000 24 146 500
Equvalent Disk space in case of Production refresh
Production LandscapeSAP ERP System (for TRM Solution) 8000 60% 12800
Database Instance20% 1600 2560 20 146 500
Application Central Instance 20% 1600 2560 20 146 100
Application Servers 80% 6400 10240 82 146 100
ASCS/DB Cluster with Multiple Application Servers
Particulars
%Distribution over
multiple servers
Additional Loading on Base SAPS
RAM (GB)
Minimum Internal
Disk (GB) - OS & SWAP
Disk (GB) (SAN)
Database Remark
10. Additional SAPS considered apart from the QuickSizer results for Other ABAP related jobs,RFCs and Interfaces. Also considered for TRM Concurrent Users.* The above mentioned sizing is budgetary and customer is recommended to have detailed sizing done for actual implementation.
SAP FICO - Version Upgrade Landscape
Partuclar
SAPS including FICO & MM
TB-1 blade Cores
RAM (GB)
Internal disk (600 GB mirror) Node
Development Landscape SAP ERP System 4000 3 48 146 1 Quality Landscape SAP ERP System 6000 4 64 146 2 Production Landscape SAP ERP System (for TRM Solution) 20000 12 192 438 1 & 2
Database Instance Application Central Instance Application Servers
Activities planned Reasons for implementation/ development
DR server
This is must have for safeguarding business critical data.Production data will be regularly synched with DR serverIncase of Disaster, DR site can be used for managing operationsThis is must have for safeguarding business critical data.Production data will be regularly synched with DR server
AD authentication One common user id and password instead of maintaining multiple user idThis helps in applying automated password change policyThis helps in applying minimum criteria of password
2010 onward Data movement from MFUND to SAP Data
It will be automated process of moving data regularly to data warehouseExtracting of reports is simple and user friendly
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warehouse
ODS option - Data extraction is cumbersome, we need to spend additional cost for generating, Data structure is not knows to user for extracting the dataData can not be stored in MFUND server since Servers will get retired in 1 year, we need retention period of minimum one yearM Fund Vendor may charge for providing data moving to database system
EHP Upgrade from older version to new version
Single database for Investments as well as GL systemSeparate box need to be maintained for maintaining separate versions, this will increase hardware cost including separate DR
Finance server is retiring hence it is advisable to implement server movement in this implementation. It will be added cost if we do this movement in future Key Risk Management Ratio will be available only on EHP 7, (Key Ratios like, Sharp Ratio, Teynor Ratio Information Ratio etc.)Finance system and treasury system cannot be in different versions, it will create data integration issues
D.COMPARISON BETWEEN M FUND AND SAP
Sr no
Feature Product: SAP FAM Product: MFUND
Company: SAP India Company: 3i Infotech Ltd. 1 Market share SAP India is the fastest growing subsidiary of
SAP SE, the world's leading provider of business software solutions. SAP India began its operations in 1996 with headquarters in Bangalore and offices in Mumbai, New Delhi, Kolkata, and a direct presence in nine cities across India, besides having marketing associates in Sri Lanka and Bangladesh.Declared as the ‘Hub of the year in Asia Pacific and Japan” in 2007, SAP India
Mfund has majority market share in Indian market only in Mutual fund and Insurance industry. Current Mfund market share of Mfund is getting reduced due to poor quality of service and outdated programming language setup and support.
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witnessed an unprecedented growth of over 100% both in terms of license revenue and customer acquisition.On the AUM basis, SAP Treasury manages more than Rs.13 lakh crores in Life Insurance in India.
2 Experience For Life Insurance companies, SAP system
used by the largest Life Insurer “Life Insurance Corporation of India” (LIC)-, Star Union Daiichi Life Insurance. In General Insurance companies, General Insurance Corporation of India (GIC), Oriental Insurance Corporation of India and Liberty Videocon General Insurance use the SAP Treasury system. Separately for other SAP Solutions (ERP, BO, etc.) SAP system also has Customers like HDFC Life, Max New York Life, Reliance Capital, SBI Life, and Tata AIA Life. For the Treasury solution (also known as Financial Asset Management for Insurance) there are 135+ Customers globally. A month back ICICI Prudential Life also signed with SAP and has started the Implementation.
Mfund has been working with UTI (the oldest and only fund house during pre-privatization era) for more than 12 years. It Provides end to end solution for front, mid and back office. With the number of changes from regulatory body it is very challenging and expensive to get changes implemented in the Mfund. The quality of implementation is not upto the standard and cost of enhancement is also very high.
MFUND system was commonly in use by Mutual Fund and Insurance companies. But deprived support and outdated technology resulted in opting out/evaluating with other options by users.
3 Integration All modules of SAP treasury module, namely front, mid and back office are fully integrated (i.e. data moves seamlessly across all modules without any manual intervention). SAP Data flows from front office module with real time updation on inflows & outflows for managing fund level daily cash flow. Online Limit monitoring module of the trade movement during transaction time. Bulk settlement of deals. System based calculation of Interest & amortization for NAV Process. Auto upload of data files stored in designated path.
All modules of Mfund, namely front, mid and back office are integrated but wherever data entry points are applicable, user have to upload manually which is prone to an error. Example of manual uploads: 1 Policy holders contribution / surrender details ( bank transfer) 2. Unit movement details received from ULS system.3. upload of price files for valuation and market data, 4. Electronic contract for equity trades executed 5.Financial information of company
4 Maker
checker controls - Regulatory (IRDAI) requirement
System to provide Maker-Checker functionality across modules with appropriate id reference & input/authorize time reference. Also availability of appropriate restrictions for back dated entries. The audit log reports are available for all the actions done in the SAP treasury module.
Maker/checker controls are present in all modules ensuring proper control over data quality. The audit log report for all modules is currently not available in the Mfund as a part of standard product.
5 Unit creation Unit capital (UMR) will be captured directly Unit creation data is received from IT
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process from Policy admin system through interface automatically and entries for the same will be posted by the SAP treasury system. UMR reconciliation will be also done through the system.
team and then it is uploaded by user in the Mfund system. The system provides facility to upload amount and number of units to be created separately thus allowing us to create units at different NAVs.
6 NAV computation capability
The system is very robust and capable of generating NAVs without any manual intervention. NAV Computation process at Scheme level EOD along with Projected and Final EOD processes. Auto upload of prices will be available using NSE, BSE, Crisil, Mutual fund prices. NAV Auto upload feature to Policy admin system. There is no such specific process of NAV projection and End of Day process (EOD) which lead to saving of process time of NAV declaration.
The system is capable of generating NAVs without any manual intervention. It also provides NAV projection module through which NAVs can be generated without actually running the End of Day (EOD) process which takes on an average 30 to 40 minutes.
7 Support for
computing NAV at "Plan" level
SAP system calculates NAV on plan level for both the method i.e. B/S & P&L for cross checking of NAV. Dividends can also be declared at plan level. Rate of management fees can be different across the plans. Currently IRDAI does not allow NAV computation at plan level and fund of fund level.
Mfund supports computation of NAV at plan level if required.
8 Historical
limits exposure and exception reporting
SAP provides detailed report which includes exposure and exception report.It also generates audit log of all the changes in limit module.
In the standard product of Mfund system, Historical limits exposure and exception report is not available. Also system doesn’t have Audit log report for Limits module.
9 Regulatory (IRDAI) reports
All IRDAI regulatory reports are available in system including New format of IRDAI BAP reports.
Only few of the regulatory reports are available in the system. Any changes to be done in the current setup are very expensive and cumbersome process.
10 Data upload
to SAPFor all modules data upload is available in SAP. Auto transfer of accounting entries from SAP investment system to SAP financial system at any given point of time for financial preparation.
Interface with any system is challenge for M Fund and currently with SAP is not readily available.
11 Domain
knowledge and Staff training
SAP India (Aegis Team) has implemented SAP Treasury module into various insurance companies including Life Corporation of India (LIC). Therefore Aegis Team have excellent experience for regulatory & compliance
Domain knowledge is deteriorating with Mfund staff. We have highlighted this issue to Mfund management at
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requirement including support for new regulatory changes required in system from time to time. They provide good functional and technical training to client team.
many occasions.
12 Implementation
We have done the preliminary round of UAT demo of SAP treasury system
We are currently using Mfund which has been implemented in the April 2010. We are facing challenges of complying regulatory and internal norms.
13 Interface SAP system has interface support to connect with other systems such as custodian system, UMR upload, Price file upload etc.
Mfund does not support with interface functionality.
14 Projected cash flow
SAP system provides projected cash generation till maturity of security without any limitation on cash flow tranches.
Mfund system doesn’t support projection of cash flow.
15 Fund fact sheet
SAP system supports base data for Fund fact sheet generation in required format.
Mfund system doesn’t support base data as well as Fund fact sheet generation.
16 Automatic reclassification basis Rating and cat code
SAP system has inbuilt capability of automatically reclassifying of Investments based on Ratings and category code
Mfund system is not capable of automatically reclassifying of Investments based on Ratings and category code
17 Yield calculation
SAP system has inbuilt capability of computing various types of yield like TWRR, MWRR) etc.
Mfund system does not provide various types of yields required.
18 Reporting tool
SAP system has inbuilt reporting tool/report writer which enable users to generate customized reports as per requirement.
Mfund system doesn’t have reporting tool/report writer. Each report is considered as customization and charge based requirement.
19 Fund Performance analysis and key ratios
SAP system has inbuilt capability of computing key ratios and fund performance analysis.
Mfund system is not capable of computing key ratios and fund performance analysis. At present this process is carried out manually by Mid office team.
20 Documentation storage
SAP system has inbuilt capability of storing all the relevant documents such as approvals and research note, Information Memorandum etc.
Mfund system does not support storing all the relevant documents.
21 Financial reporting (ULIP Disclosures)
Integration of SAP treasury module and GL module will enable financial reporting (ULIP Disclosure) automation & will lead to more accuracy.
M Fund system does not support financials reports and currently prepared manually.
22 Real time Cash flow position
Integration of SAP treasury module and GL module will enable auto update of policyholder’s contribution/surrender
M Fund system does not support auto updates.
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amounts for Investments which will lead to optimum fund utilization.
23 Fund Manager Limit
SAP system supports to configure Fund Manager Limit as per Investment Policy.
M fund system doesn’t support to configure Fund Manager Limit as per Investment Policy.
24 Automated Holding reconciliation with custodian
SAP system has inbuilt capability of automated holding reconciliation with custodian holding report.
M fund system doesn’t support automatic holding reconciliation with custodian holding report.
25 Deal Requisition & modification
Fund manager will have lot of flexibility & ease in raising the deal requisition. Modification of the unexecuted deal is also possible in SAP system adding value to the fund management. The what-if-analysis is also available in system.
Fund manager is not able to modify the deal once entered & compelled to delete the entire deal to incorporate any modification needed & re-enter it. There is no what-if-analysis in Mfund.
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27
Position update
Pre-deal Compliance
SAP System is competent of reducing the holding quantity in system after entering sale requisition caring from the risk of short sale.
SAP system is capable of pre-deal compliance which is very crucial for investment Front office.
M Fund system is incompetent of reducing the holding quantity in system after entering sale requisition putting us at risk of short sale.
M Fund system does not have feature of pre-deal compliance. The system has failed to stop fund manager in entering the deal beyond investment limit on couple of occasions.
E
F. IRR CHALLENGES:
This is a strategic business decision for replacing the existing investments system. The new investments system will help in shifting the Manual process to automotive processes this lead to strengthening the controls. The new system will help to absorb additional reporting requirement in quick turnaround time with saving in manual effort.
The IRR is for this project is negative, however the evaluation for this spend is basically on the regulatory requirement, which the current system was not able to fulfill.
G. RISK OF IMPLEMENTATION:
Below mentioned is specific Risk have been identified and the mitigates also mapped against each risk. Key Risk Risk Mitigation
1 Resource RiskCore Team has been formed along with back up planning for each sub business units; this also ensures the BAU activities are not affected.
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2 Training RiskAegis Limited (Implementation Partner) will provide detailed training during UAT as well as 2 month onsite support post go live of system
3 Timeline RiskDetailed Project plan will be prepared and this will be monitored by Project steering committee
4 Hardware Risk
Detailed study has been done by Internal IT architecture and Application Team along with the product as well Implementation partner which will ensure all the requirement from hardware perspective
5 Product Risk
SAP FAM product is been used by many Large business enterprises in BFSI segment with in India as well as world.AIA is also using FAM product as investment management system. This enable the FAM is having the latest investments product available in global investments market
6 Migration Risk
Data migration risk will be mitigated through effective execution and validation of data, sanity & quality check will be carried out by TALIC core team as well as vendor. Minimum 2 to 3 month Parallel operations activity will be carried out.
7 Regulatory Risk
The Risk of changes in the existing Investments & relevant regulations will be evaluated and the actionable will be decided mutually between TALIC and implementation partner.
8Version Upgrade Risk
Thorough UAT will be done by respective stakeholders before release to ensure that there is no version issue. There will be separate “development server” will be created for existing enhancements. This ensure that existing development does not get impacted
H. TRAINING REQUIREMENT:
Investments Operations Team is currently using SAP FICO module and are well versed with the system. In case of FAM module,Traininng will be provided by implementation partner and onsite support will be provided for two months post go live.
I. RESOURCE REQUIREMENT:
The System Implementation will be managed within existing resources of investments Team.
J. Project Plan:
Activities1 Scoping 2 Business Blue Print3 Design & Development4 Quality Testing UAT5 Data Migration14 | P a g e
6 Parallel with existing system7 Go Live
Note: The detailed project plan will be prepared post discussion with Aegis Limited. The indicative time lines is 7-9 months from the date of issue of Purchase order to Implementation Partner.
Apart from SAP FAM module implementation, Aegis Limited is also upgrading FICO module currently used by TALIC for Financial Accounting. The indicative timeline for version upgrade is 3 Months.
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K. Project Governance
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Accountable Exco MemberHarshad PatilVishal BandlishAmitabh Verma
Project ManagerTilak Parikh Karunakaran Banjan Representatives of Aegis Limited
Project Steering Committee :Harshad Patil, Samrat Das,Vishal BandlishSenior representative of Aegis Limited Karunakaran Banjan Representatives of Aegis Limited
Project Core Team:Khetan Pankaj, Rajeev Tewari, Kashyap Bhatt, Amol Khandewale, Tejas Shah, Abhay Berde, Sudhir Rao, Manoj KalzunkarKarunakaran Banjan Representatives of Aegis Limited
L. SIGNOFF:
Name Signature & Date Name Signature & Date
Prepared ByKashyap Bhatt- Senior Manager
Karunakaran Banjan Asst. Vice President
Reviewed ByTilak Parikh- Vice President
Vivek Agarwal - Vice President
Approved by Harshad Patil- Chief Investments Officer
Samrat Das - Chief Information Officer
Approved by Vishal Bandlish- Chief Financial Officer
Amitabh Verma - Chief Operations Officer
Approved by Naveen TahilyaniManaging Director & CEO
Annexure I
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List of Change request in M Fund system
Sr. No Bug Track ID No Bug Track Issus/ Description1 792885 Mfund Customization Cash Flow Deployable2 857182 Integration of MFUND system with SAP system 3 857222 Interest Rate Swaps IRS 4 858736 Limit Exception Report for Limit Breaches 5 858885 Equity as Limit basis for monitoring equity limits6 859715 Fund Factsheet Data from Mfund Back office7 862156 Holding report Customized8 863352 Investment Yield Calculation TWRR9 862200 M1 Fund NAV calculation Methodology if AUM turned Zero
10 864407 Audit Log report for Passive/ Active limit breaches11 854084 HSBC Net digitally signature of deal
12 845133Cash flow required for UL and NUL securities for next 25 years and Above
13 858690 M Fund user recertification online 14 859607 PUT/CALL Option IIB Asset class
15 861835SAP download entries are coming on security level required on account level/asset level to reduce count of entries
16 863471Accounting entries of CBLO Deals As per Series defined in Master
17 855687IRDAI Form 6 Market value column not in line with Holding report Prospective effect Changes in Reports
18 846683 Requisition bunching in debt deals 19 852704 Limits for Inter scheme deals required 20 855034 Compliance Limits Report Historical data 21 862015 Audit log report
22 860255Breakup of AUM (Customized report) to be available from AM/Web dealing module
23 863428 Historical Limit report Web dealing
24 863151ETFMF instructions required to be generated from web dealing system in the prescribed format
25 862627 What IF Analysis26 863276 Transaction entry time limit breach report27 863101 M Fund Web Dealing Admin Module Requisition Reports28 863374 Amount to be displayed in 8 decimal places for ETF trades
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