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Learn why data and analytics are at the heart of risk management, particularly in challenging economic and uncertain times.
What really stood out when attending the RiskMinds International Conference and talking to our clients in Barcelona last week was the sense of uncertainty, whether related to credit risk, operational risk, liquidity risk or climate risk.
During the event, the point was made time and again that the ability to drive effective risk management in an environment of heightened uncertainty is undoubtedly down to the data.
It stands to reason that with rising interest rates and a slowing economy, risk management - in all its guises - is fast becoming a priority for financial institutions.
There is currently an increased risk of default, meaning banks need to detect early signs of credit risks by having a deep understanding of their counterparties.
Uncertainty is also a concern for chief risk officers who have to manage a range of operational issues from realising cost efficiencies, to calculating the ability to withstand a cybersecurity attack.
In the crypto world, Liquidity risk was highlighted by the liquidity crunch confronted by the FTX cryptoexchange and its concerns over financial stability.
Climate risk was another hot topic given the concurrent COP27 conference in Egypt. Not only is there a lack of standardisation of sustainability data, firms need to have the ability to process the sheer amount of micro information and be able to combine it with other risk elements to exploit opportunities.
There did appear to be a consensus at the event that the uncertain environment can best be mitigated by quantification, underscoring advanced data platforms and global data framework initiatives formed another major underlying theme. Measuring risk means accessing and performing simulation on granular data that is coming in from multiple sources. By streamlining this data, firms are then equipped with business intelligence that can not only help them to react to situations, but to adopt a proactive approach as well. In particular, this means a growing need for more capacity around running simulations, either single 'what if' simulations or bulk simulations, to create forward-looking views.
On this very subject, Societe Generale’s Deputy Chief Financial Officer, Xavier Lofficial, joined our CEO Stéphane Rio on November 9th for a break-out session to share the banking group’s experiences in leveraging data and innovation in the transformation of its risk and finance processes. Among the topics they explored were the greater need for data granularity and access to more data history, the performance of systems handling the growing demands for access and the volume of complex searches, smart certification of reports and operational efficiencies such as cost savings.
Opensee’s technology allows firms to access and explore combined data sources, as well as create data analytics and simulations. In the current climate, our clients are finding it really helpful to be able to understand the underlying calculations behind their data models. End users can easily access the most granular information and calculations, down to every single line of code, without having to surround themselves with an army of data scientists. The platform not only provides an audit trail for regulatory purposes, but comes inbuilt with a versioning capability that allows adjustment workflows to be easily viewed or amended.
All these features come from a deep-rooted understanding of customer problem sets through our longstanding experience working within the financial services industry. The Opensee solution can either come as a platform for larger banks to be integrated with proprietary infrastructure, or as a packaged, fully-managed cloud solution that can be implemented quickly.
Ultimately, there is no risk management without data, and there is no useful data without technology. As such, there was very much an awareness at RiskMinds that before we can talk about machine learning, we need the ability to access data at a very large scale and to provide it to end users.
The key takeaway from the conference was that to maintain resilience during these uncertain times, institutions need endurance and the motivation to keep them hanging on. To do so, they need to have the ability to grasp and understand all aspects of information that surrounds them. And, more importantly, the tools that let them do so.
Stéphane Rio and Julie Louvrier had the pleasure to be interviewed at RiskMinds in Barcelona.It was fantastic to be with industry leaders and risk experts at this leading industry event, which was full of enlightening discussions.
Don't wait and watch the video here.
