IMAGINE FINANCIAL RISK MANAGEMENT IN 2020
By the year 2020 – just 12 years post the 2008 financial crisis – enterprise risk management will look remarkably different, says Lance Smith, Chief Executive Officer of TS Imagine. Because of rapid advances in trading technology, structural changes in the marketplace and increasingly stringent regulatory requirements, enterprise risk will evolve to become more like front office desk risk – except on a global basis. Risk management will become real-time across all traded products and aggregated across all regions.
How will the risk management evolution take place?
LS: It is already well underway for some firms, those forward-thinking firms that – before and since 2008 – realized that a necessary element for success in markets good and bad was better risk management: comprehensive and fast. 2008 exposed a painful and expensive Achilles Heel for financial firms that did not have a single risk engine that could effectively capture aggregated firm-wide exposures or play out the effect of a specific market scenario (collapse of real estate prices and equities, drying up of credit and liquidity, spikes in volatility, etc.) across all business units. At the same time, advances in technology have pushed trading frequencies to nearly a continuum, while OTC derivatives began clearing on CCP’s “as fast as technologically possible” as mandated by the CFTC; 99% of all trades are now cleared within ten seconds. This requirement would have been technologically unthinkable only a few years ago and became the turning point for firms who understood that the velocity of risk was only going to increase and that regulations would only become more complex. Looking back and standing still were no longer options for financial firms and their stakeholders. Read More
The Dollar Milkshake Theory – Stress Testing the Potential Impact of a Sovereign Debt and Currency Crisis
Stress Tests play an important role in improving financial stability by enhancing market discipline and transparency. Here we consider the third example of these stresses based on current market conditions and show how the risk factors can be generated along with their relevant shock examples.
Since the start of the war in Ukraine, Western nations have imposed sanctions on many Russian individuals, businesses and state-run enterprises. Stress Tests play an important role in improving financial stability by enhancing market discipline and transparency.
Stress Tests play an important role in improving financial stability by enhancing market discipline and transparency. Clients leverage TS Imagine’s flexible and powerful risk engine to stress test a variety of specific scenarios. With Americans set to commence voting early next week, markets around the globe are watching carefully. Will the midterms disrupt the Democratic legislative agenda or tip in their favor? We ran two scenarios through our stress-testing engine, gaming the potential market impacts. Please note that these are hypothetical shocks and are not a prediction of any forthcoming events.