Capital markets firms are acknowledging that the cloud is a catalyst for establishing competitive advantage and the financial services sector has been taking steps to prioritise digital transformation.
This is an extract from ‘The Tipping Point of Cloud and Risk Management in Capital Markets’, a Finextra Research impact study in association with Numerix, part of the AWS Cloud Series.
To meet customer requirements and remain competitive, financial services organisations must increase their agility, reduce time to market for new products and services, and address the spiralling total cost of ownership (TCO) of their IT infrastructures. Today, it is evident that all roads lead to the cloud.
Risk and more: The challenges in capital markets
The industry has reached a tipping point where more so now than ever, the implementation of a comprehensive, real-time trading and risk management system is necessary.
Navigating risk management continues to be a cumbersome task for capital markets firms. Amid economic uncertainty, the key challenge for risk management is the ability to obtain timely and accurate risk measures across all their trading operations.
Market volatility and global economic uncertainty casts light on sound risk management practices. Times of stress can complicate processes further, as capital markets firms struggle to derive actionable insights from data fast enough to make informed and profitable trading decisions when required. Disjointed technology ecosystems based on legacy infrastructure, fragmented data silos, and manual processes exacerbate this challenge.
With a ‘front-to-risk’ system, senior executives, traders, and risk managers are provided a holistic, up-to-date view of their risk exposures which allows them to make better trading decisions, actively manage risk and gain greater perspective and consistency across the trade lifecycle.
A multi-dimensional view can also support capital markets firms in confidently trading complex derivatives and structured products. Greater precision, transparency and flexibility can create a greater competitive advantage, while at the same time, help to navigate and remain compliant with new regulations such as Uncleared Margin Rules (UMR) or the Fundamental Review of the Trading Book (FRTB).
The cloud blueprint
Forward-looking capital markets firms are choosing to overcome these challenges by moving workloads to the cloud, using Amazon Web Services (AWS) and adopting a software-as-a-service (SaaS) approach to running and hosting their risk management applications, with support from technology providers such as Numerix and their real-time derivatives pricing and risk management solutions.
The opportunity to derive actionable insights from data in order to make profitable decisions encourages capital markets firms to rethink and rearchitect their data management infrastructure, breaking down siloes and integrating with other systems such as trade booking systems and market data repositories.
Risk managers can scale capacity as needed to accommodate workloads and ensure impactful risk analysis with access to the limitless power of cloud, rather than being forced to compromise and seek shortcuts because of a lack of fixed, in-house computing power. This flexible scaling of capacity is of paramount importance under unpredictable or volatile market conditions.
The cloud also allows financial institutions to focus on business transformation and innovation, while enabling IT teams to easily spin up virtual machines, experiment in centrally hosted environments, and set up a robust backup to ensure resiliency and maintain the continuity of their risk management systems.
Click here to read ‘The Tipping Point of Cloud and Risk Management in Capital Markets’.