Press Release - Counterparty risk is the toughest one to manage

Published in The Treasurer – 1^st October 2011

Xavier Bellouard :
“Stale, inaccurate data”

Senior risk managers from global banking operations struggle to calculate market and credit risk in real-time, according to a recent survey.

The Risk in Global Banking report was compiled by business intelligence and analytics technology specialist Quarter FS, which asked senior risk managers to rate the difficulty of managing different types of risk. Counterparty risk was cited as the most difficult to manage by 68% of respondents, followed by liquidity (59%) and credit risk (54%).

Asked whether the financial crisis had boosted the influence of risk management, 86% of respondents agreed, while 81% said their board now took a much greater interest in risk. 63% strongly believed that risk management processes were now more widely used in the front office, and the same percentage said that new process had been introduced since the crisis broke. 54% thought the crisis had led to more collaboration between traders arid risk managers. Regulatory pressures, cited by 63%, were seen as the main reason to innovate in risk management, followed by the need to better manage risk (50%).

Although market risk was regarded as the least difficult risk to manage, half of the respondents wanted market risk calculations for any new deal to be conducted in true reaI-time, or under 10 seconds. Yet only one in five were currently managing to do so and only two in five said they could conduct the calculations overnight.

“lf one lesson has been learnt from the experiences of the past few years it is that navigating today's markets without the ability to understand and manage risk intraday is the biggest risk of all”, said Xavier Bellouard, co-founder of Quartet FS. “The business implications of those findings are clears most financial institutions cannot calculate the true risk of now deals to their business intraday, which means that they continue to work with stale, inaccurate data.”

More News