Innodata Isogen launches risk management data unit

Source: Innodata Isogen

Innodata Isogen (NASDAQ:INOD) today announced the launch of docGenix, a newly formed division of Innodata, providing software products and services that help financial institutions manage large portfolios of legal and trade agreements.

docGenix provides web-based applications that enable financial services firms to generate, negotiate, monitor and analyze the negotiated provisions of Master Agreements and Credit Support Agreements published by the International Swaps and Derivatives Association, Inc. ("ISDA"), as well as financial and legal documentation relating to repos, securities lending, prime brokerage, investment management and clearing. Using the docGenix product suite, firms can proactively manage risks embedded in these documents - such as ratings downgrade and Net Asset Value triggers - by performing deep portfolio analysis and stress tests. The docGenix applications also provide Web Services data feeds designed to interface with in-house applications (such as collateral and risk management systems) as well as third party systems (such as swap data repositories).

The docGenix applications and data feeds are enabled by an XML data model that represents derivatives and other financial/legal documents as computer-readable algorithms. This XML data model was developed over the past several years and represents over 27,000 man-hours of development by finance lawyers and XML architects. It contains a standardized yet flexible reference model of the universe of legal and financial terms utilized in Master Agreements, Credit Support Agreements and other financial agreements.

Since financial services firms typically warehouse large portfolios of Master Agreements, Credit Support Agreements and other financial documentation as images or PDFs, docGenix provides a fully managed service to digitize the documents at high accuracy levels and then analyze and extract critical data elements using specially trained staff and technology. Recently, Innodata had on staff over 800 attorneys performing data extraction from complex legal documentation.

"The problem with a large portfolio of legal agreements is that critical data contained within the agreements is effectively obscured," stated Jack Abuhoff, Innodata CEO. "Take, for example, a major financial institution with billions of dollars of risk in several thousand derivatives contracts - if there's a general market deterioration or if even just one of their counterparties fails or even just begins to deteriorate, the institution could lose tens of millions of dollars in the time it takes to have their lawyers read and analyze hundreds of pages of complex legal documents. With a docGenix data solution, not only can the institution react quickly with certainty - it can even be "war gaming" in advance, testing its portfolio under different scenarios. Moreover, the docGenix approach will enable institutions to future-proof against anticipated reporting requirements. The Financial Crisis Inquiry Commission noted in its 2011 Report1 how the existence of millions of opaque derivatives contracts governed by Master Agreements and Credit Support Agreements between systemically important financial institutions triggered a panic that resulted in the failure of prominent financial institutions and costly government-sponsored bailouts. It is therefore not surprising that the April 2011 CFTC and SEC Congressional Study2 under the Dodd-Frank Act suggested that information contained in Master Agreements and Credit Support Agreements may also be used by regulators for the analysis of systemic risk. The docGenix approach will enable institutions to future-proof against anticipated reporting requirements in addition to proactively managing their credit and legal risk."

Innodata acquired the docGenix brand name and certain technology components (including the XML data model) from an affiliate of Allen & Overy LLP, a global law firm with offices in 26 countries and principal external counsel to ISDA globally.

Jonathan Brayne, Partner and Chairman of Allen & Overy's Innovation Panel, said, "Bringing together the data model and technology that were developed when docGenix was part of the Allen & Overy group with Innodata's scale and proven document processing and technology capabilities creates a very strong solution for financial institutions who wish to proactively manage risk, reduce cost, speed reaction time to changes in market conditions or counterparty financial condition, and future-proof for changes in regulatory requirements that are now on the horizon. We look forward to seeing the docGenix solution develop its potential under Innodata's ownership."

Michael Will, an alumnus of Clifford Chance and Allen & Overy LLP, has joined Innodata as President and Chief Product Officer of the docGenix division. Will is a derivatives lawyer and technologist, with 10 years of experience in applying sophisticated technology to complex legal documentation. Will was co-founder and partner in Allen & Overy's Derivative Services affiliate and created the data model and technical architecture behind its award-winning netting and collateral products, netalytics and CSAnalytics, which are currently in use by approximately 75% of the world's largest financial institutions.

"I am so very pleased to be part of Innodata," Will said. "In addition to its proven ability to analyze mission-critical legal information with great accuracy and efficiency, Innodata has over the past couple of years quietly assembled an outstanding cadre of content technologists with whom I can continue to broaden and evolve the docGenix product set in compelling and innovative ways." 

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