Financial stress testing and risk management simulations have become increasingly important to the global banking industry, increasing demand for the products of Fiserv, a Fortune 500 company that generated nearly US$5 billion in 2008 revenue. The company and its partner, Kamakura Corporation, recently tested the Fiserv® KRM enterprise risk management solution on Microsoft SQL Server 2008 Enterprise (64-bit) database software. They found it was able to easily scale to meet the demands of the largest banks, performing at speeds rarely encountered in actual production, topping 6,000 writes per second. Fiserv and Kamakura engineers also tested the new Data Compression, Backup Compression, and Transparent Data Encryption features of SQL Server 2008 Enterprise and found they produced big benefits for banks while seamlessly integrating with the Fiserv KRM solution.

Situation

After financial markets around the world experienced exceptional turbulence in the Fall of 2008, there was greater focus within the banking industry, and beyond, in risk analytics including what-if simulations, stress-testing models, and the best ways to make mark-to-market (fair value) calculations. The uncertainties of the times demand more robust scenario planning, which regulators are also strenuously advocating.

Among the most prominent providers of risk solutions to banks, credit unions, and lending institutions is Fiserv, a Fortune 500 company based in Brookfield, Wisconsin that is one of the world’s largest technology organizations in the financial services industry. More than 21,000 customers in 60 countries use products from Fiserv, including its solutions for insights and optimization and risk and compliance.

Fiserv® KRM is an integrated, enterprise risk management solution that helps banks to promptly make decisions related to more efficient and profitable management of assets. Used for credit risk, market risk, liquidity and currency risk, and interest rate risk, as well as Basel II capital calculations, Fiserv KRM incorporates advanced risk concepts developed by Cornell University’s Professor Robert A. Jarrow, an originator of the Heath-Jarrow-Morton multi-factor term structure model.

After the testing, we can confidently say that SQL Server 2008 Enterprise can process the largest loads we’ve seen in any of our deployments. Chuck Rowland Vice President and Managing Director of International Operations, Risk & Performance Solutions, Fiserv

Banks use the risk assessment software for stress testing and other financial modeling to help stay ahead of events by continuously testing how changes in interest rates, currencies, and changes in the stock market or housing industry can impact asset valuations.

With the need for its risk management solutions growing, Fiserv was interested to validate the scalability and other key features of Microsoft SQL Server 2008 to determine that it could address the needs of its clients, many of which are large banks.

The goal of the testing was to see how SQL Server 2008 could handle the demands the application places on the database. Tests were made on the demanding overnight batch loads that are used by Fiserv KRM to model risk.

Additional goals were to test three new features in SQL Server 2008 Enterprise that financial institutions could benefit from: SQL Server 2008 Data Compression, SQL Server 2008 Backup Compression, and SQL Server 2008 Transparent Data Encryption.

“Fiserv KRM is like a flight simulator for banks,” says Chuck Rowland, Vice President and Managing Director of International Operations, Risk & Performance Solutions at Fiserv. “Banks can use our simulation tool to test their strategies in advance in the same way that others test a new airplane in a wind tunnel before the plane actually takes flight. Fiserv KRM is a sophisticated analytical engine that enables banks to assess their risks before or after they take them, including simulating changes in market conditions and testing hedge effectiveness to help them be more proactive in managing assets.”

Solution

A Fiserv engineering team tested Fiserv KRM on SQL Server 2008 Enterprise running on Microsoft Windows Server 2008 Enterprise for 64-Bit Systems at the Microsoft Technology Center in Reading, England. The Fiserv team modeled the demands that could be placed on Fiserv KRM, representing more than 300 gigabytes (GB) of information and 24 million transaction records.

Test Platform
The Fiserv KRM team at the SQL Server Lab used a platform modeled on what its customers would use in the real world. The test platform included:

• Portal Server. Users access the application and reports, through the Fiserv KRM Portal Reporting application run on the Windows Server 2003 Enterprise Edition operating system, and hosted on an HP BL680c blade server computer with 4 Intel Xeon Quad-Core processors and 32 GB of RAM.
• Application Server. The Fiserv KRM application ran on the Windows Server 2003 Enterprise Edition operating system, and was hosted on an HP BL680c blade server computer with 4 Intel Xeon Quad-Core processors and 32 GB of RAM.
• Database Server. The Fiserv KRM database was supported by Microsoft SQL Server 2008 Enterprise running on Windows Server 2008 Enterprise and hosted on a Dell PowerEdge 6850 server computer with 4 Intel Xeon Dual-Core processors and 32 GB of RAM.
• Storage. Storage was on an EMC Symmetrix DMX 1000 with 1.5 terabytes of LUN storage.

Iain Banks, Technical Consultant for Risk & Performance Solutions at Fiserv, notes: “Testing began with handling 75,000 transactions, and scaled up to several million transactions—a rate that would only be seen in the largest banking scenarios.”

Test Results
Testing demonstrated that SQL Server 2008 was able to easily process the data generated by the Fiserv KRM application, which required SQL Server 2008 to process more than 6,000 database writes per second.

“Before conducting this testing we really didn’t have the specific data points to tell customers who were interested in running Fiserv KRM on SQL Server,” says Rowland. “After the testing, we can confidently say that SQL Server 2008 Enterprise can process the largest loads we’ve seen in any of our deployments. It handled the loads easily. We were also delighted with the valuable features such as the compression and encryption built into SQL Server 2008.”

Testing began with handling 75,000 transactions, and scaled up to several million transactions—a rate that would only be seen in the largest banking scenarios. Iain Banks Technical Consultant for Risk & Performance Solutions, Fiserv

Testing of the three SQL Server 2008 Enterprise features found:

• SQL Server 2008 Data Compression. Available on the Enterprise version of the software, the Data Compression feature was used to reduce the size of tables by using page compression. Compression averaged 70 percent, with some tables compressing at 90 percent. Using compression added to the processing loads on SQL Server by less than 1 percent.
• SQL Server 2008 Backup Compression. Available on the Enterprise version of the software, the Backup Compression feature provided a 92 percent reduction in the database size, as a 364 GB database was reduced to 28 GB in the testing. Backup times for the 364 GB database were reduced from 47 minutes without compression, to 26 minutes with compression. Restore times were reduced from 45 minutes to 29 minutes.
• SQL Server 2008 Transparent Data Encryption. Available on the Enterprise version of the software, the Transparent Data Encryption feature was used to encrypt both data and log files of the database, providing physical file protection against loss or theft of data files and backups. Testing found that encryption added only about 5 percent to processing overhead.

Benefits

The lab testing with Fiserv KRM found that SQL Server 2008 Enterprise provides enterprise-grade performance and scalability. Fiserv was impressed with its testing of the new Data Compression, Backup Compression, and Transparent Data Encryption features of SQL Server 2008 Enterprise.

“Fiserv KRM provides an excellent example of how organizations throughout the financial services industry can reduce risks and more precisely monitor exposure and other key measures using the Microsoft Application Platform,” says Marcia Engel, Director Global Alliances, Worldwide Financial Services Sector at Microsoft.

Enterprise-Grade Performance and Scalability
Testing Fiserv KRM on SQL Server 2008 Enterprise gave Fiserv the high-level details needed when asked by customers about the performance and scalability of SQL Server 2008.

The testing was set up to represent the extreme loads a database would have to support during the complex calculations a bank runs with Fiserv KRM for stress testing and other risk modeling. Stress testing has become especially important to banks in recent years as market forces have become more dynamic. Fiserv KRM enables a bank to continually recalculate the ever-changing risk exposure an institution faces as interest rates, currency exchange rates, stock market performance, housing prices, and a world of other factors go up or down, each setting off a cascading effect on other variables that impact asset valuation and risk exposure.

“Banks have to maintain a certain minimum level of capital,” notes Rowland. “Fiserv KRM enables them to calculate how much capital they need based on these risk factors, even predicting the probability of a customer defaulting on payments. For a bank holding bonds for a large automobile manufacturer, for example, it would help them to calculate the probability that the car company would default. Stress testing helps the bank to identify their exposure ahead of time. The idea is to experience problems through simulation so you can take action to avoid them in real life.”

Some governments are requiring banks to deploy encryption. Other banks want to embrace encryption as an internal best practice. Either way, SQL Server has a simple-to-deploy solution with a very low processing overhead. Chuck Rowland Vice President and Managing Director of International Operations, Risk & Performance Solutions, Fiserv

“We ran the test just as one of our very largest customers would,” says Banks. “We used the same kind of hardware, the same kind of data, and ran the same kind of simulations. In virtually all intents and purposes it was a real-life situation.”

“During the testing SQL Server 2008 performed at speeds rarely encountered in actual production, topping several thousand writes per second,” says Banks. “Even more impressive, SQL Server handled this with ease, which means it could scale further.”

Data Compression
The Fiserv KRM team was impressed by the effectiveness of the Data Compression in SQL Server 2008 Enterprise, and by the fact that using compression had so little impact on processing speeds. “Using data compression on several tables, the largest tables out of the entire database, we dropped the size of our database by 90 percent,” says Banks. “Just as impressive as the reduction in database size was the fact it seemed that the processing of our simulation wasn’t affected at all by the compression on the database.”

Compression could be of interest to Fiserv KRM customers because of the huge volumes of data that can be generated while running risk calculations. “During our testing we generated nearly a third of a terabyte of data within just a few days,” says Banks. “Imagine a bank running a process like this every day, and it may have to keep those results for up to five years. Running these risk calculations five or more times a week, multiplied by 52 weeks in a year, for 5 years, can generate loads that would make a database administrator faint. So the ability to reduce the size of the data generated by 70 percent or 90 percent would be of interest.”

Backup Compression
The Backup Compression feature of SQL Server 2008 Enterprise can help banks dealing with large data stores from Fiserv KRM calculations. “The Backup Compression numbers—which came in at 92 percent—were quite impressive,” says Banks. In addition to slashing the need for backup storage, compressing the data also reduces the time required to run backups, and the time required to restore data. “A database administrator wants to know that if something goes wrong, the system can be up and running as soon as possible,” says Banks. “With backup compression it should be faster to restore data, which makes for happier system users.”

Enhanced Data Security with Transparent Data Encryption
Testing of the Transparent Data Encryption feature of SQL Server 2008 Enterprise impressed the Fiserv KRM team in two ways: It was easy to deploy, and it caused very little increase in processing loads. Activating Transparent Data Encryption is just a point-and-click procedure, and because it is completely handled from within the database, no code changes are required for the application. “The testing of the Transparent Data Encryption feature was eye opening because it provided encryption without having to touch the application,” Banks says.

Introducing Transparent Data Encryption is timely because of encryption requests from customers. “Some governments are requiring banks to deploy encryption,” says Rowland. “Other banks want to embrace encryption as an internal best practice. Either way, SQL Server has a simple-to-deploy solution with a very low processing overhead.”

Lower Total Cost of Ownership
For the banks that may choose to deploy SQL Server 2008 to support Fiserv KRM, there are a number of benefits that could help lower the total cost of ownership.

“The testing showed the benefits of compression and how encryption can be deployed with little processing overhead, and all of these features are built into SQL Server 2008 Enterprise, so there could be a savings,” says Rowland. “The same could be said for SQL Server Integration Services for performing ETL [extract, transform, and load] and the built-in reporting and analytic tools.”

The testing showed the benefits of compression and how encryption can be deployed with little processing overhead, and all of these features are built into SQL Server 2008 Enterprise, so there could be a savings. Chuck Rowland Vice President and Managing Director of International Operations, Risk & Performance Solutions, Fiserv

ETL is important to banks using Fiserv KRM because of the many data sources an organization may want to feed into the risk management system. “The exact data feeds vary by bank, but typically there are data imports from transaction systems, perhaps multiple investment systems and loan systems, and a number of third-party information suppliers such as Reuters and Bloomberg,” says Banks. “SQL Server Integration Services provides a powerful and easy-to-use ETL tool set for pulling disparate data feeds into the Fiserv KRM application, or better yet into a data mart to support reporting and analytics without impacting the resources available for the application.”

For reporting and analytics, the Fiserv KRM teams is pleased with SQL Server 2008 Reporting Services, a server-based platform designed to support a wide variety of reporting needs, and SQL Server 2008 Analysis Services, which provides enterprise-scale analytic solutions that deliver actionable insights through familiar tools. Reporting Services and Analysis Services are a good solution for organizations that wish to augment the reporting built into Fiserv KRM by deploying a separate data mart. Banks that make use of Reporting Services and Analysis Services may gain a lower total cost of ownership benefit, as both are built into SQL Server and are available at no additional cost.

“Deployment of a separate database, in the form of a data mart, is something we advise our Fiserv KRM customers to consider if they want a more flexible reporting solution and analytics,” Banks says. “You can run the data mart on the same instance of SQL Server, but on a separate database in order to preserve the Fiserv KRM database for transaction processing.”

Summary
In summary, testing of its Fiserv KRM application has demonstrated that SQL Server 2008 Enterprise provides enterprise-grade performance and scalability that is very competitive in the market. Testing with 24 million transactions—a rate that would only be seen in the largest banking scenarios—SQL Server 2008 Enterprise performed at speeds rarely encountered in actual production, topping 6,000 writes per second. Banks can also take advantage of the benefits of compression, and data encryption without needing to license or integrate third-party applications. Fiserv KRM risk assessment software on Microsoft SQL Server 2008 provides a highly valuable solution for financial institutions that could meet their requirements for robust enterprise risk analytics and reporting capabilities and that could lower the cost of ownership.


Microsoft Server Product Portfolio
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For more information about Microsoft products and services, call the Microsoft Sales Information Center at (800) 426-9400. In Canada, call the Microsoft Canada Information Centre at (877) 568-2495. Customers in the United States and Canada who are deaf or hard-of-hearing can reach Microsoft text telephone (TTY/TDD) services at (800) 892-5234. Outside the 50 United States and Canada, please contact your local Microsoft subsidiary. To access information using the World Wide Web, go to:
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For more information about Kamakura Corporation products and services, call (800) 791-9888 or visit the Web site at: http://www.kamakuraco.com/

For more information about Fiserv products and services, call (800) 872-7882 or visit the Web site at: http://www.fiserv.com/

This case study is for informational purposes only. MICROSOFT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS SUMMARY.

Document published December 2009