Risk management systems for sell-side institutions cover a range of capabilities across different categories of risk such as liquidity risk, market risk, credit risk and operational risk. They are required to support a broad range of asset classes, as well as a variety of risk analytics including both pre-deal and post-trade analytics. Sell-side risk management involves front, middle and back office operations.
This report, while taking into account recent developments in the enterprise risk management environment, focuses on aspects of risk management that are relevant to the capital markets trading concerns of the sell-side. Given the diversity and nature of solutions and tools available, Chartis has concentrated on capabilities particularly relevant to sell-side risk management. These include:
- Collateral optimization
- Pre-deal analytics and limits management
- Post trade margin simulation
- Market risk
- Liquidity risk
- Credit/counterparty risk
- Front-office and Middle-office integration
- Data management
- Use of high-performance hardware
- Data visualization and reporting
We have purposefully excluded operational risk, GRC and financial crime from this analysis. These aspects of risk management are very important for mission critical risk technology for the sell-side but are covered in detail in other Chartis reports.
Regulatory pressure and scarcity of capital, coupled with advances in technology, have raised demand for systems able to carry out risk management under tight time constraints. High performance systems are essential to meet current and future core sell-side requirements.
This research report provides an overview of the developing trends toward risk management for the sell-side. We examine what this means in practice for financial institutions (FIs). We look both to current and anticipated demand and, on the supply side, consider technology that responds to this demand.