Risk and regulation transformation a new technology paradigm

By Alexandre Bon, Global Head, Risk Control, Murex
Capital markets are witnessing a risk management revolution as the financial crisis highlighted critical deficiencies in control frameworks. Institutions realised they needed to gather a holistic picture of their exposures and move towards real-time risk management. The massive regulatory shake up that ensued is also reshaping derivatives markets, forcing banks to deleverage their trading activities and reducing their profit margins significantly.
○ Risk infrastructures need to be reinvented to deliver regulatory compliance and improved controls, while cutting IT and operational costs
○ Rationalising processes and centralising activities onto integrated trading and risk platforms is necessary to restore pre-crisis profitability levels
○ Building a highly adaptable and fully real-time enabled risk management framework, will require strong technology partnerships
Achieving compliance in a constantly evolving regulatory environment is a daunting task. However, the required investments in processes and technology can be leveraged in the context of new organisation models to improve resilience and restore profitability. With liquidity risk, credit risk and cost of capital now the main drivers of profitability, banks that can adopt a centralised risk-focused business model will gain a competitive advantage.
Today, many firms are still grappling with inefficiencies in their systems and data management, and with the computational demands of the new risk and capital calculations. Yet investments in risk technology pave the way for competitiveness. In a first stage, sharing tools and processes across the organisation and rationalising the IT landscape enables the consolidation of activities onto integrated risk and trading platform to improve costs and operational efficiency. In a second stage, resources are re-focused on higher profitability areas through enterprise-wide risk and capital optimisation strategies, using collateral trading or XVA management for instance.
Financial institutions are looking for innovative technology and collaboration models that can deliver a real-time risk infrastructure capable to adapt to fast-evolving regulatory and business requirements. With its well established partnership approach and leading-edge risk technology, the company offers a solution to current and future challenges.
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