Why are we still having to find the scary risks ourselves hidden in grids of data?”

Even in 2024, Risk managers are still forced to pro-actively scour endless data grids to identify the risks lurking within the book.

And when they need to investigate a specific issuer, country or sector, they often receive an incomplete view of the total risk due to the silo'd nature of divisions and separate systems for market, credit and counterparty risk.

60% of Risk managers and traders we asked said they are forced to supplement the official risk tools with spreadsheets of their own

So what will the risk tools of the future feel like? What do risk tools need to do in order to help both traders and the second line risk managers perform their roles properly?

Based on interviews with 60 risk managers and traders, here's our top ten features of the future of risk management.

‍

‍

Instead of presenting appendixes of risk data in vast data grids, risk systems will identify emerging hot topics, which could be sector, issuer or specific trade.

They will present news-style stories to risk managers (both traders and risk officers), including pinned datapoints and a concise assessment of the situation.

In this way, traders and risk managers spend less time scouring the data universe for issues and more time thinking about how to resolve them.

‍

‍

‍

No more pasting screenshots into chat channels, no more relying on Powerpoint.

The tools that present the risk data will also house the opinion and expertise of risk managers and traders, who will be able to share and pinpoint their concerns and predictions through mico-blog posts attached to data points.

This will radically improve the relationship between trading, second line of defence and senior management

‍

‍

Risk tools won’t stop at merely identifying risk issues: They will recommend the best course of action, which may be the most cost effective hedging strategy - which can be executed with one click. In this way, traders won't have to guess whether to hedge a large transaction - or what the most cost effective heading strategy is. Instead, they will be in charge of defining the business rules and risk thresholds which govern the automatic hedging logic.

Sophisticated product correlation matrices and ongoing assessment of prices will minimise hedging costs while staying within the defined risk tolerances.

‍

‍

No more jumping between different systems to get the complete picture. Future risk management tools will give Risk Managers a comprehensive view of all the major risk areas—market, credit, and counterparty—in one place.

For example, if they want to search for their risk to Greece, they will be able to see Greek credit exposures and counterparty risks along side the market risk associated with Greece. This helps Risk managers make more informed decisions.

‍

‍

In the future, Risk Managers will have the ability to simulate the impact of large transactions before they’re executed. This means they can model different scenarios and see how a big investment or deal will affect their overall risk profile - on a book, desk, or across the bank

With this increased precision, traders won't have to be as risk averse as they are currently.

‍

‍

So what have we missed?

Or is your organisation already doing all of these things?

We'd love to know your views.

‍

‍

‍

‍