Two weeks ago I questioned what form a ‘new risk management’ would take and how far the industry is rallied around the 2010 GARP Risk theme of “Transforming Risk into a new world order”. I had hoped that the convention would reveal risk managers finally
beginning to understand the vital role data management plays in helping untangle messy internal processes – and at last I wasn’t disappointed.
Of course data is important. Virtually all processes drive off common and shared data sets and garbage in equals garbage out. There’s nothing like a full blown crisis to make financial institutions reassess what they really need and what they really need
to do. In recognizing that they must have a fully comprehensive understanding of all the instruments (debt) they hold, and of all related information on customers, counterparties, issuers and collateral, financial institutions are now investing properly in
something they should have prioritised long ago – foundational infrastructure.
Fuelled by risk management initiatives, major buy-side firms are embracing the concept of centralized data with new rigour. Recent projects are extending and linking siloed security databases, across customers, counterparties, instruments and transactions.
This way they are enabling rapid valuation of even the most complex instruments. These projects often extend to collateral management, where an enterprise-level view of data makes it easier to prove that debts are adequately covered.
With a view of both exposure to risk and the collateral which can be offset against that risk, firms can begin to regain trust from both customers and investors. This has got to be the best outcome from the current situation. And in future, this new level
of transparency will provide much needed protection to companies when the markets turn sour again.
Blog updated: 25 May 2015 12:24:27