Buy-Side Risk Management Technology - Market Update 2016

<p>Changes in the buy-side marketplace continue to pose challenges for firms in the space, which now&nbsp;faces a convergence of pressures: a dynamic, fragmented and competitive sector, the search for&nbsp;returns in a macro environment beset by low interest rates, and increased attention from regulators. Increasingly, buy-side firms view risk management technology as a strategic capability that enhancestheir investment decisions and makes them stronger and more competitive. They are also increasingly taking an enterprise-wide approach to risk management, and now tend to emphasize processes that enhance investment strategies, diversify risk, and create a best-practice platform for analyzing markets, credit and liquidity risk management. This approach focuses on maximizing return while remaining aware of profit and loss (P&amp;L) and risk attribution through stress testing.</p>

<p>Key trends in this latest update are:</p>

<p>•<strong> </strong><strong>Risk is increasingly being incorporated into the whole value chain.</strong> As buy-side firms&nbsp;realize the added value of risk analysis, the role of the Chief Risk Officer (CRO) has&nbsp;become more salient. As well as increasing value, the integration of risk analytics into&nbsp;the value chain also enables buy-side firms to better align investors with their desired risk&nbsp;appetite.</p>

<p>• <strong>Risk technology continues to move toward a Risk as a Service (RaaS) model.</strong> Many&nbsp;buy-side firms, which are HR-light and operate on fee-based models, are unable to create&nbsp;in-house solutions, so seek out RaaS offerings instead. Many vendors have embraced RaaS,&nbsp;and it is now available in many forms, from cloud solutions to managed services offering&nbsp;full business process outsourcing.</p>

<p>• <strong>Operational and market structures are changing.</strong> Firms view data not only as a&nbsp;regulatory requirement, but also as an effective tool in strategic management. The adoption&nbsp;of risk data aggregation is taking hold in buy-side firms. They are looking for new ways&nbsp;to implement risk management systems, and increasing their focus on enterprise-wide and&nbsp;hybrid approaches to adopting technology. But there is still a time lag between the point&nbsp;at which a buy-side firm takes on exposure and the point at which the risk management system reports it, so there is a continuing drive toward intraday reporting.</p>

<p>• <strong>Pressure from regulators and investors is increasing. </strong>As regulatory and investor&nbsp;focus broadens to include buy-side firms, this remains a key driver with reference to the&nbsp;Alternative Investment Fund Managers Directive (AIFMD), Form PF and UCITS IV. For&nbsp;their part, investors have become much more demanding, and now expect a high level of&nbsp;transparency. Firms in the sector are also anticipating a drip-down effect of BCBS 239, as&nbsp;well as the need to prepare for increased risk data aggregation capabilities and a heightened&nbsp;focus on capital and liquidity, particularly for insurance firms.</p>

• Tweet  
• Facebook  
• LinkedIn  
• Save this article
• Send to  
• Print this page  

• Topics
• Analytics
• HPC/Calculation/Processing
• Programming Languages
• Risk & Data Technologies
• Fees, commissions and payments
• Banking