The Challenge

During the financial crisis, financial institutions truly struggled to grasp their true exposure to Lehman Brothers and AIG as these firms were collapsing. As a result, in today’s financial services industry, all firms small and large alike, recognize the importance of effective risk management and have made it a priority. There is no doubt that the past few years have brought much greater scrutiny to this business function and risk professionals are subject to ever increasing pressure to provide complete, accurate and more real-time risk reporting.

Nowadays, vendor or in-house solutions can offer state-of-the art risk monitoring capabilities and analytics. You will find a plethora of technologies and quantitative models that will compute and spit out various measures, analytics and reports. However, sophisticated tools and techniques will always fall short as long as the raw data is weak. For example, how can you rely on a report showing your exposure to a counterparty when the counterparty information used as an input was partial or inaccurate?

Unfortunately, Data Management is not a core competency of the risk management systems in the market today. This is a significant weakness often overlooked by users and decision-makers. Yet, a successful risk management program depends on high-quality data. Weak data management is a major issue that risk managers can no longer ignore.

 

More relevant than ever

Much of the impetus for enhancements to risk management practices come from existing and emerging regulations. These regimes force firms to more accurately understand their risk exposures and manage their collateral appropriately. Basel III, for example, strengthens the capital requirements for counterparty credit exposures arising from banks’ derivatives, repo and securities financing transactions. These rules impact not only your compliance efforts but also your bottom line as your need to allocate your capital as effectively as possible.

The Dodd-Frank Act, for its part, introduces a framework for financial institutions with large exposures. Furthermore, it sets limits on the concentration of credit exposures a bank holding company can have with unaffiliated companies.

In some cases, specific rules are still being defined. Nonetheless, whatever the details of these rules may be in the end, you will not escape the obligation to clearly understand your interaction with counterparties, clients and various other entities.

 

How we can help?

Joss Technology offer solutions designed to achieve a more effective management of your credit and operational risks.

Our approach is to focus on the quality of the data you will use in your risk management application to ensure it does the job it is supposed to do. We provide the only comprehensive set of solutions that enable you to centralize and elevate the quality of all risk-relevant data across your organization.

The typical processes we will put in place include/Examples of processes we can put in place include:

  • Enterprise-wide collection of all entity information (counterparties, clients, custodians, issuers, or prime brokers)
  • Aggregation of data from all your different business activities, geographical operations and corporate entities
  • Conversion and normalization of all relevant data sets
  • Data cleansing and enrichment (using a wide range of internal and external sources)
  • Creation of a holistic view of the entity to be fed in your risk system
  • Ongoing data maintenance including proactive alerting based on events (rating changes, bankruptcies, mergers & acquisitions,…)
  • Implementation of business rules and workflows that ultimately guarantees data accuracy in your risk system