Financial Risk Management as it pertains to different industries – Banking, Capital Markets and Insurance – has been one of the most discussed topics in this blog. The business issues and technology architecture of systems dedicated to aggregating, measuring & visualizing Risk are probably one of the more complex tasks in the worlds of finance & insurance. This post summarizes ten key blogs on the topic of Financial Risk published at VamsiTalksTech.com. It aims to serve as a handy guide for business and technology audiences tasked with implementing Risk projects.
The twin effects of the global financial crisis & the FinTech boom has caused Financial Services, Insurance and allied companies to become laser focused on on risk management. What was once a concern primarily of senior executives in the financial services sector has now become a top-management priority in nearly every industry.
Whatever be the kind of Risk, certain themes are common from a regulatory intention standpoint-
- Limiting risks that may cause wider harm to the economy by restricting certain activities such as preventing banks with retail operations from engaging in proprietary trading activities
- Requiring that banks increase the amount of and quality of capital held on reserve to back their assets and by requiring higher liquidity positions
- Ensuring that banks put in place appropriate governance standards ensuring that boards and management interact not just internally but also with regulators and their clients
- Upgrading governance standards, enabling a fundamental change in bank governance and the way boards interact with both management and regulators. These ambitions were expressed in various new post‐crisis rules and approaches.
- Tackle the “too big to fail” challenge for highly complex businesses spanning multiple geographies, product lines and multifaceted customer segments. Accurate risk reporting ensures adequate capital conservation buffers.
With this background in mind, complete list of Risk use case blogs on VamsiTalksTech is included below.
# 1 – Why Banks and Other Financial Institutions Should Digitize Risk Management –
Banks need to operate their IT across two distinct prongs – defense and offense. Defensive in areas like Risk, Fraud and Compliance (RFC) ; Offensive as in revenue producing areas of the business like Customer 360 (whether Institutional or Retail), Digital Marketing, Mobile Payments, Omni channel Wealth Management etc. If one really thinks about it – the biggest activity that banks do is manipulate and deal in information whether customer or transaction or general ledger etc.
# 2 – Case Study of a Big Data Enabled IT Architecture for Risk Data Measurement – Volcker Rule/Dodd Frank –
While industry analysts can discuss the implications of a certain Risk mandate, it is certainly most help for Business & IT audiences to find CIOs discussing overall strategy & specific technology tools. This blogpost discusses how two co-CIOs charged with an enterprise technology mandate are focused on growing and improving a Global Banking leaders internal systems, platforms and applications especially from a Risk standpoint.
# 3 – A POV on Bank Stress Testing – CCAR and DFast –
An indepth discussion of Bank Stress Testing from both a business and technology standpoint.
# 4 – Capital Markets – Architectural Approaches to the practice of Risk Management –
In Capital Markets, large infrastructures ,on a typical day, process millions of derivative trades. The main implication is that there are a large number of data inserts and updates to handle. Once the data is loaded into the infrastructure there needs to be complex mathematical calculations that need to be done in near real time to calculate intraday positions. Most banks use techniques like Monte Carlo modeling and other computational simulations to build & calculate these exposures. Hitherto, these techniques were extremely expensive from both the cost of hardware and software needed to run them. Neither were tools & projects available that supported a wide variety of data processing paradigms – batch, interactive, realtime and streaming. This post examines a detailed reference architecture applicable to areas such as Market, Credit & Liquidity Risk Measurement.
# 5 – Risk Management in the Insurance Industry – Solvency II
A discussion of Solvency II – the Insurance industry’s equivalent of Basel III – from both a business and technology standpoint.
# 6 – FRTB (Fundamental Review of the Trading Book) –
An in-depth business and technology discussion of the highlights and key implications of the FRTB (Fundamental Review of the Trading Book).
# 7 – Architecture and Data Management Antipatterns –
How not to architect Financial Service IT platforms using Risk Applications as an example.
# 8 – The Intelligent Banker Needs Better Risk Management –
# 9 – Implications of Basel III –
This blogpost discusses the key implications of Basel III.
#10 The Implications of BCBS 239
This blogpost discusses the data management and governance implications of BCBS 239. The BCBS 239 provides guidelines to overhaul an organization’s risk data aggregation capabilities and internal risk reporting practices.
Industry clearly requires a fresh way of thinking about Risk Management. Leader firms will approach Risk as a way to create customer value and a board level conversation around such themes rather than as a purely defensive and regulatory challenge. Surely, this will mean that budgets for innovation related spending in areas such as Digital Transformation will also slowly percolate over to Risk. As firms either digitize or deal with gradually eroding market share, business systems that work with and leverage risk will emerge as a strong enterprise capability over the upcoming 3-5 year horizon.