Barclays has signed an enterprise-wide license agreement with simulation company Simudyne to explore new ways to manage risk in a simulated virtual environment, leading to smarter business decisions.
The simulations that Barclays has been building with Simudyne’s toolkit take advantage of an innovative technique known as ‘agent-based modelling’, which is increasingly being recognised as an important development in quantitative analysis. Agent-based models allow businesses to simulate complex networks, like financial markets, by examining how the interactions of large individual agents may drive broader behaviour.
Unlike traditional ‘regression-based’ models, which analyse the historical behaviour of numerous participants and are based on large-scale historical data analysis, the bottom-up approach of agent-based modelling is used to identify and model risk in instances with sparse historical data and relatively few participants.
Simudyne is also helping Barclays to understand the broader opportunities of agent-based modelling and computational simulation by hosting a series of hands-on workshops and seminars delivered by industry experts, academics and Simudyne staff. This work will form the basis of a computational simulation ‘Centre of Excellence’ inside the bank.
Barclays first began working with Simudyne when they took part in the 2017 cohort of the Barclays Accelerator, powered by Techstars, in London. The Barclays Accelerator is an intensive 13-week programme designed to accelerate the world’s best and brightest fintech start-ups by providing unprecedented access to the Barclays and Techstars networks, as well as invaluable insights from some of the smartest minds in fintech.
This is the latest in a series of partnerships that Barclays has announced with fintech companies, demonstrating the open innovation strategy that is enhancing the way that the bank develops new products and services. Through its newly announced Barclays UK Ventures unit, as well as the global Rise network, Barclays has access to a global fintech community, and an unfettered mandate to identify and incubate new business lines.
C.S. Venkatakrishnan, Barclays Group Chief Risk Officer, said: “We are delighted to be using Simudyne’s toolkit as part of our ongoing efforts to improve the ways in which Barclays identifies and manages risk. By building agent-based models we hope to spot and prepare for risks arising from dynamic and large, direct and contingent, counter-party exposures. This helps create a more robust and stable bank for our customers, clients and shareholders.”
Justin Lyon, CEO and Founder of Simudyne, said: “Agent Based Modelling has opened up a number of opportunities for banks to test any decision before committing resources or taking any action in the physical world. Barclays’ decision to use simulation as a competitive advantage is just one expression of their focus on innovation. We are also pleased to be collaborating with the bank on the Barclays’ Centre of Excellence to help surface the ideas that will underpin future profitability and waste cutting”.