Buy-Side Risk Management Technology 2015

<p>Asset managers play an increasingly pivotal role in the financial system. They have assets under&nbsp;management (AuM) equal to 75% of banking balance sheets on a global basis which makes them, in&nbsp;many ways as systemically important as the banks.</p>

<p>Buy-side firms are continuing to face a rapidly changing operating environment. Key drivers and&nbsp;principles are contradictory and conflicting:</p>

<ul>
<li>A demanding search for yield and returns within a challenging and non-intuitive macroeconomic&nbsp;environment that therefore needs performance to be measured more closely&nbsp;against risk appetite across a greater universe of assets.</li>
<li>A continued need to comply with behavioral change and reporting requirements of multijurisdiction&nbsp;regulation and market structure changes that is going to become more intrusive&nbsp;on the buy-side as attention is turned towards it.</li>
<li>Costs need to be sustainably managed down to retain and win clients, who are now more&nbsp;insightful, and satisfy shareholders.</li>
<li>The buy-side is taking over a lot more sell-side asset ownership and, therefore, risks.</li>
</ul>

<p>These drivers have a profound effect on risk management and its technology which requires:</p>

<ul>
<li>“On-demand”, nimble risk management software platforms or services that support all&nbsp;parts of the enterprise.</li>
<li>Broad asset class coverage, extensive risk factor analyses, a choice of pricing and analytic&nbsp;source-code or high-level scripted libraries.</li>
<li>A focus on supporting and contributing to investment decision-making, portfolio&nbsp;management and optimization through configurable dashboards for analytics, stress testing&nbsp;and scenario analyses.</li>
<li>Comprehensive, best practice data management.</li>
<li>Cross-fertilization of software and services that come not only from the sell-side and other financial services areas but also from other industries and businesses.</li>
</ul>

<p>In our previous report we noted several drivers of buy-side risk management – regulation, market&nbsp;structure changes and investor behavior shifts. There has been little change in direction but there have&nbsp;been increases in velocity and acceleration with some bumps along the way, but firms are still on the&nbsp;journey. What is clearer in our view now is that the buy-side risk tools, while converging with the&nbsp;sell side tools, will always remain somewhat different, due to the exigencies of each group’s legacies,&nbsp;their inventory management, investor reporting, history of out-sourcing and relative lack of skilled&nbsp;resources. This report updates our earlier research on the current trends in buy-side risk management&nbsp;technology.</p>

<p>This report uses Chartis’s RiskTech Quadrant^® to explain the structure of the market. The RiskTech&nbsp;Quadrant^® uses a comprehensive methodology of in-depth independent research and a clear scoring&nbsp;system to explain which technology solutions meet an organization’s needs. The RiskTech Quadrant^®&nbsp;does not simply describe one technology solution as the best risk management solution for the buyside;&nbsp;it has a sophisticated ranking methodology to explain which solutions would be best for buyers,&nbsp;depending on their implementation strategies.</p>

<p>This report covers the leading vendors offering risk management solutions for the buy-side, including&nbsp;Axioma, BlackRock Solutions, Broadridge, Calypso, FinAnalytica, FINCAD, IBM, ICE, Imagine,&nbsp;Markit, Misys, MSCI, Murex, Numerix, OpenGamma, OpenLink, Quantifi, SimCorp, StatPro,&nbsp;SunGard, UBS Delta and Xenomorph.</p>

<p>This report excludes any analysis of the operational risk and governance requirements for the&nbsp;buy-side. This important market segment is covered in other Chartis reports on operational risk&nbsp;management systems, conduct risk and GRC (Governance, Risk, and Compliance).</p>

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