The new goal is a performance-oriented trade and risk management execution strategy for asset allocation with a strong focus on stress-testing and scenario analysis.
For buy-side risk management solutions, this means the focus has to be redefined as either:
- More data management and analytics-driven to build a foundation of efficient risk and financial management or;
- Best-of-breed solution for specific, performance-oriented and value-based risk management requirements.
For both, the priority is to enable the firm to follow high standards on corporate governance and to facilitate the necessary tasks that come with it, including:
- Data management, analysis, and reporting
- Trade capture, complex/structured products, and hedging strategies
- Pricing, valuation, risk measurement, regulation, and finance
- Integrated risk management views across market, credit, and liquidity risk
- Total return simulation and scenario management.
“We have been impressed by the depth and breadth of functionality provided by Quantifi and their holistic, integrated approach that breaks down barriers between front, middle and back office functions. A key differentiator for Quantifi is its open, service-based technology architecture, which makes the solution easier to integrate, more flexible and easier to support.”
Market changes, the economic downturn, and increasing regulatory requirements are putting pressure on business operations to improve internal return on capital and have a much better understanding of trading risks. It is no longer sufficient to have a simple regulatory capital number at the end of the day. Firms need a solid understanding of their intra-day risk exposures across a wide range of measurements with a higher level of detail and transparency. Firms also need to understand enterprise risks and the threats from certain financial products, such as CDOs.
Several trends are emerging
- There is an increased use of Value-at-Risk (VaR) as a tool to measure and communicate risk
- Firms want to integrate collateral management and collateral optimization with their risk, treasury, and finance management, and, where possible, outsource collateral operations
- Firms want to increase and integrate scenario analysis, stress testing, reverse stress testing, liquidity testing, and capture and define tail risk
- Firms are becoming more vigilant with respect to counterparty credit risk and its costs, including reviews of clearing members, exchanges, and collateral and margin requirements
- Initial and variation margin is being integrated into the front office, with margin scenario and CVA analysis as an important part of pre-deal decisions
- Increased volatility in the types of asset directions and portfolios held, and the shedding of assets such as energy portfolios on the sell-side are creating opportunities as well as risk management challenges
- Solutions need to be more open, more flexible, and adaptable enough to follow and incorporate future risk, financial, and regulatory requirements
- The reduction of total cost of ownership and greater demand for hosted/serviced solutions
Chartis, a provider of research and advisory services covering the global market for risk management technology, conducted in-depth independent research on vendor solutions available to buy-side firms for adapting to the new market and regulatory environment and for managing risk. The report uses Chartis’s RiskTech Quadrant® to explain the structure of the market. The RiskTech Quadrant® includes a sophisticated ranking methodology to explain which solutions would be best for buyers, depending on their implementation strategies. Based on its completeness of offering and market potential, Chartis considers Quantifi to be a leading vendor in the buy-side risk analytics market.
“Buy-side firms face significant new market and regulatory challenges and need increasingly sophisticated and robust analytics and risk management. Our position in the Quadrant is a strong endorsement that Quantifi’s value is proven among buy-side firms”.Rohan Douglas, CEO, Quantifi
Peyman Mestchian, Managing Partner at Chartis. “We have been impressed by the depth of breadth of functionality provided by Quantifi as it addresses these challenges with a holistic, integrated approach that breaks down barriers between front, middle, and back office functions. A key differentiator for Quantifi is its open, service-based technology architecture which makes the solution easier to integrate, more flexible, and easier to support.”
As cited by Chartis, Buy-Side firms are witnessing a rapidly changing operating environment and need to not only comply with regulations but also adapt to a new marketplace. Quantifi’s solution for Buy-side Analytics is an integrated Portfolio Management Systems (PMS) that delivers cross-asset trading, front-to-back operations, position management, market, credit, counterparty and liquidity risk management, margining, and regulatory reporting all on a single integrated real-time platform. As well as integrating all regulatory and industry practices, Quantifi applies the latest technology innovations to provide new levels of usability, flexibility, and ease of integration. This translates into dramatically lower time to market, total cost of ownership and significant improvements in operational efficiency.
The solution includes risk analytics for the buy-side, risk reporting, and operations solutions. The most important features offered by the solution include:
- Support for a broad range of major asset classes
- Trade capture and extensive pre-trade analysis
- Trade lifecycle management
- Streamlined and customizable workflow
- Real-time risk and P&L
- OIS discounting for valuation
- Integrated margining and collateral
- Flexible reporting
- Out-of-the-box market data, prime brokers, OMS and fund administrator interfaces
- An agile system with fast implementation.