Risk Management Overview
Risk Management has many different dimensions that include quantitative measures and qualitative characteristics. The quantitative measures address different types of risk attributable to market activities. Qualitative risks usually address compliance with and/or best practice adherence to laws, regulations and organizational policies. Spectacular and notorious failures continue to occur, and the root cause of every one of them is either a complete lack of or the break down both quantitative and qualitative aspects of Risk Management.
RiskMonitor® is AxiomSL’s quantitative risk management solution. It is suitable for both enterprise and business unit requirements. The solution has functional modules that cover market, credit, and liquidity risk, earnings at risk, and risk based economic capital. It covers virtually all instruments and asset classes. The distinguishing value RiskMonitor® offers is its ability to operate on any source data structure, in a multi-user, high-performance analytical environment. It has user-friendly application components to set-up, operate and maintain the solution’s tasks and work flow. Noted for its flexibility and coverage, RiskMonitor® integrates best practice methodologies resulting from extensive and continuing investments in research and development. Experience has shown that the RiskMonitor® implementation is the fastest and most cost efficient in the industry.
The robust data management infrastructure that AxiomSL integrates with RiskMonitor®, called Integration Center™, seamlessly brings source data, measurement task parameters, results storage and reporting, and work flow together. This end-to-end capability saves money, saves mistakes, and it saves time; so clients can focus on what to do with the information, rather than focusing on just getting the information.
Risk Management Credit Risk
Credit Risk is a set of quantitative measures that address the client’s customers’ (counterparties and issuers) obligations magnitude and impacts from the chances of loss due to client defaults and credit strength erosion.
RiskMonitor provides real time credit exposure pro forma for new deals, and limit compliance. The system covers all asset classes and provides through time and point in time PFE/EPE Gross and Net of Margin and Netting Agreements.
Limits administration and compliance monitoring includes work flows for pre and post trade breach report routing and allows for Term Ladder hierarchies. Limits may be established along any set of aggregation dimensions, including customer segments, credit ratings, countries, instruments, plus the counterparty’s corporate structure from child to parent. Limits can also be denominated in any measurement output, including Current and Potential Future Exposure, Notional Amounts, Economic Capital, etc.
RiskMonitor’s Credit Risk module includes a long term holding period method and a method suitable for margin/repo style business, where the “Margin Period of Risk” is over a shorter period of time related to the margin liquidation period.
RiskMonitor® also calculates economic capital, regulatory capital, credit value adjustment, debit value adjustment and funding value adjustment.
RiskMonitor gives clients the ability to quickly see credit risk in actionable ways and with the combination of earnings provides valuable tools for portfolio optimization.
Risk Management Market Risk
Market Risk is related a set of quantitative measures that address market prices and rates changes having a financial impact on business activity results. It also addresses the economic capital required to sustain this business activity through market cycles, along with measures that test the validity of the assumption parameters of the risk measurement methods.
The most common measure of downside risk is Value at Risk, or VaR. It is based on the measurement of a distribution of portfolio value changes using a user defined time series of market data (prices and rates), and portfolio holding period.
RiskMonitor provides an architecture that allows clients to perform many different market risk measures in the form of Risk Versions. This also allows clients to have many simultaneous users performing risk measurement tasks concurrently, on a common set of data.
In addition to providing Regulatory Compliant measures, like Stress, Back Testing and Risk Capital, RiskMonitor also offers additional distinctive measures, such as VaR by Risk Factors and Risk Factor Groups, Benchmark Variance VaR, Alpha, Beta, Correlations and R-Squared.
Changes in data and requirements are implemented in unrivaled speed and control, while AxiomSL’s versioning architecture preserves the old measures and their connection to old parameters and old data.
EBA publishes Opinion on transitional arrangements and credit risk…
The European Banking Authority (EBA) published today an Opinion on transitional arrangements and credit risk adjustments to mitigate the effect of the accounting standard IFRS 9…
FINMA Publishes Circular On Credit Risks And Disclosure
The Swiss Financial Market Supervisory Authority FINMA has published the revised circular on credit risks and disclosure for banks. The regulations on credit risk capital requirements…
Leading Spanish Bank Selects AxiomSL’s Strategic Analytics…
AxiomSL’s enterprise-wide approach enhances analytics and controls throughout the organization while providing management with dashboards and internal and external reports…