Managing Risk in Financial Markets: Because No One Is Really Too Big to Fail
In the half decade since the nearly disastrous global financial collapse of 2008, not much has been done to address the issue of some banks being “too big to fail.” For the most part, governments have taken little action to mitigate the risks these massive banks represent by trying to break them up into smaller entities. Some legislators are so wary of the influence these banks have on local economies that taking any action against the most massive financial institutions is considered risky enough.
To be fair – and maybe a little naïve – there are indications that the largest of these institutions realize that “banking with abandon” won’t be forgiven the next time things go bad. One sign is the investments banks are making in a capability that the TABB Group, a financial markets research and strategic advisory firm, calls “risk in high-definition.”
Too Smart to Fail
According to a paper published earlier this year, Risk in HD technology – including out-of-the-box products – provides end users with current, real-time risk analytics and information across a broad band of enterprise-related areas including valuations, liquidity, and counterparty exposure. This unparalleled data convergence provides market participants with real-time insights into microlevels of risk data.
With more clarity, institutions benefit from enhanced detail and greater transparency while allowing a holistic view. Risk in HD has the potential to change the way risk is viewed by enabling a continuous, real-time analysis of an institution’s risk profile.
And while we can cross our fingers that all of the too-big-to-fail banks will make the best use of this technology, the good news is that it’s affordable and customizable for use by all those big-enough-to-be-a-problem institutions too.
Mitigating Risk Mitigation Software
In the report, the TABB Group highlights three important features that financial institutions should consider when shopping for software. They include:
- Customizable – Risk in HD software and support must be easily customizable to each institution and its specific needs.
- Configurable – The system must suit the needs of the individual asset class to be analyzed and maintained. It must be able to collect and analyze radically different data structures in real time.
- Adaptable – Risk in HD systems must be able to adapt to new data types, message formats, and both structured and semi-structured data. Updating the system to enable it to capture new data formats and types must be quick and easy.
To learn more about Risk in HD and the technology that supports it, read the TABB Group report.