SAS^® Risk Management

Make your investment in regulatory risk management pay off in more effective operation

Risk management is a work in progress for all firms on the sell side. It also applies to those who consider themselves buy side, but still need to run positions.

Traditionally, risk has been in silos. This is by risk category and by asset class, as a minimum. Combined counterparty and market risk is as much as even the most advanced Tier 1 players have yet achieved.

As for the frequency of provision of risk measures, this tends naturally to be less frequent the wider the scope. Intraday risk is achievable, but usually not across the whole firm.

The smaller firms have less coverage, but also smaller resources.

The Tier 1 players have large resources, but huge obstacles of complexity, scale and legacy.

The challenges in risk management are probably the widest in any field of IT for capital markets; for example:

• Matching tier 1 technology in smaller institutions when it comes to combined credit and market risk, let alone taking into account operational or liquidity risk.
• Preserving competitive advantage in terms of unique risk models, without having to build a complete risk infrastructure from scratch.
• Putting the emphasis on risk events because it is identifying risks that is often most important, along with or instead of a focus on refining models for individual risks.
• Filling in the gaps between existing risk systems based on asset classes, legacy trade entry systems.
• Pushing price models to the front office which is rightly the aspiration as they have the strongest expertise in many cases. However, how do you ensure oversight? What about providing an audit trail when spreadsheets are often the norm for exotic products?

How SAS Can Help

• Credit Risk - Portfolio credit risk and counterparty credit risk
• Market Risk - Complete choice of parametric VaR, stress testing, historical simulation and Monte Carlo methods
• Operational Risk - Gartner Magic Quadrant solution
• Basel II - Supports the entire compliance process for the second pillar
• Anti-money laundering - Address this aspect of external fraud using adaptable, transparent methods
• Trader Surveillance - Where internal controls and fraudulent or careless abuse are the issue
• Rapid Risk Profiling - A new approach to strategic aspects of risk management and their link to remuneration