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>

  • LinkedIn  
  • Save this article
  • Print this page  

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@chartis-research.com to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Chartis Research? View our subscription options

You need to sign in to use this feature. If you don’t have a Chartis account, please register for an account.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here.