Capital markets firms can gain a competitive advantage by creating a centralised risk management model and scenario library embedded within a high-performance risk management and pricing platform, linking the front office, middle office and risk management teams.
• Linking the front and middle offices will help risk managers still constrained by the need to gather information on an ad hoc basis. Rapid reassembly of derived risk exposures and the creation of on-demand dynamic views of risk management will result in increased efficiency and precision.
• A centralised library solves problems created by a typical front office’s use of localised, desktop tools and applications which may not have the proper levels of control, auditability and access by risk analysts. In addition, front offices develop a risk management knowledge base that remains secure and accessible to remaining staff members when people leave the firm.
• Standardised components in the library will speed pre-trade and post-trade risk assessment and enhance the ability to create standardised review packages. The front office can create the packages from the components used to define products. Packages are then sent to the middle office and risk management teams who, in turn, have access to these same components.
• Anticipated regulatory changes will demand more transparency from capital markets firms. Firms can deliver transparency and accountability more readily with firm-wide access to a centralised library of standardised risk management models and processes.
This is an extract from a White Paper written by Michael Stefanick, director of the US risk practice at SAS, which is a global provider of business analytics software and services.
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