Technology will be a key differentiator in risk management, according to findings by Aite Group, a global research and advisory firm, and Torstone Technology, a leading provider of post-trade processing and risk management.
The digitalization of risk technology will be a pivotal factor in the monitoring and management of risk during increasingly common periods of volatility and continuing market uncertainty. The extensive research based on interviews with leading industry executives describes a number of risk management trends that are being shaped by the recent wave of volatility, new regulatory requirements, the ever-growing volume of data, and market structure changes impacting sell-side institutions.
Practical use cases for AI and machine learning will be slow to develop, but this will eventually equip chief risk officers with a better toolbox of analytics and capabilities. The computing-intensive nature of risk analytics will lead to the deployment of more scalable technologies. Cloud-based ystems will continue to replace on-premises risk structures.
The use of innovative cloud-based technology is increasing in risk management and will influence changes within organizational structures
necessary to achieve scale while reducing total cost of ownership. It also highlights a growing need for the sell-side to identify synergies across regulations and optimize the use of data in risk management and other business areas, resulting in lower costs in the long run.
Anthony Pereira, Head of Torstone’s Risk Platform, said: “In rapidly changing global markets, risk teams need technology that provides real-time oversight and the capability to answer new questions not captured in their daily batch reports. This comes while operational and compliance costs continue to increase for the industry, putting ever-greater pressures on the firms already operating in a challenging environment characterized by thin margins. With new regulations such as FRTB insight, sell-side firms that have invested in upgrading their risk systems will have a clear advantage over those who have not.
Reviewing the existing inefficiencies and identifying areas for improvement would be a key first step. Always-on, centralized, cloud-based risk technology that is scalable in times of volatility is the foundation for robust risk management in the years to come.”
Audrey Blater, senior analyst at Aite Group, added: “The boundaries of existing risk management technology are being tested more intensely now than ever before. Ongoing market volatility necessitates rigorous calculations as well as increased data management and consumption. The shift to digitalization will continue to find its way into various parts of banks as technology creates common threads across business areas.”
