Liquidity risk and asset-liability management (ALM) are gaining in importance. A long list of new regulations, accounting standards as well as the advent of comprehensive stress-testing regimes has raised the profile of liquidity risk management in particular. Financial institutions now realise that their decades-old liquidity risk and ALM policies and associated technologies are outdated. For the first time, these areas of risk management are demanding similar levels of attention as in credit risk.
Chartis has observed a steady increase in demand for liquidity risk and ALM solutions. Each area has distinct requirements and drivers. Regulatory change, including the latest stress-testing regimes, is the main driver behind financial institutions’ move to improve liquidity risk and ALM technology. Data management will prove to be perhaps the biggest challenge to delivering timely and accurate risk intelligence that is required. Again, in response to regulatory requirements, financial institutions will demand a near to real-time reporting capability as they seek to overhaul their liquidity risk and ALM practices.
Another compelling trend is the requirement for more integration across these traditionally silo-based systems. As with other areas of risk management, financial institutions are seeking to integrate liquidity risk and ALM into an enterprise risk management (ERM) platform. The largest firms will look for solutions they can add into their own bespoke and integrated platforms. By contrast, smaller firms with less complex requirements will opt for pre-packaged solutions. However, the general idea is the same: firms of all sizes and in all locations wish to undertake liquidity risk and ALM as part of their ERM strategy.
On the demand side, Chartis Research forecasts the global market for liquidity risk management and ALM technology to grow to $871 million (c.€637.5m) by 2013, at a compound annual growth rate (CAGR) of 18.3%. In addition to those already mentioned, the key drivers for growth will be:
· Increased demand by the insurance industry;
· Cost reduction; and,
· Increased demand from the emerging markets.
Chartis considers FRSGlobal to be a leading vendor in the ALM and liquidity risk management market. As such, this report highlights the key strengths and capabilities of FRSGlobal and its position in the overall competitive landscape.