SunGard is helping financial institutions use technology to gain an enterprise-wide view of risk and convert data into actionable information. This gives financial institutions the ability to understand the provenance of risk and make sound strategic business decisions such as how much capital to hold in reserve, where to allocate capital, which hedging strategies to employ and how high or low to set risk thresholds. SunGard also helps financial institutions adopt holistic approaches to enterprise risk and compliance that support both management and governance objectives.
SunGard recommends three ways that risk managers can use technology to improve the accuracy of strategic decision making: 1. use an integrated technology platform to achieve a holistic view of risk; 2. conduct more detailed scenario risk analyses and stress testing to understand the circumstances behind potential losses; and 3. calculation intensive applications should use cloud computing, grid computing and other advanced technology for improved firepower and accuracy.
â¢ Tactical vs strategic decision-making: risk information used for day-to-day tactical decisions should be extended to support risk analysis required for strategic decisions.
â¢ Holistic risk management: risk exposures across an organization need to be viewed holistically in order to identify concentration of risk: for example, several business silos might hold positions with exposure to US housing mortgages. In isolation, a financial institution could withstand the loss potential to a single business silo, however, taken together, the impact to a financial institution could be catastrophic.
â¢ Stress Testing: institutions have relied too heavily on basic risk measures like Value-at-Risk; instead they should use more advanced analytics like scenario analyses and stress testing. Stress tests need to be created in the context of a firmâs risk system with scenarios that would be most injurious given the nature of the firmâs current positions.
â¢ New risk measures will demand more advanced technology: Fundamentally there is greater demand for added detail, risk data and the ability to do ad hoc inquiries and analyses. Technology like Software-as-a-Service, grid computing and 64-bit technology can help.
Jeffrey Kutler, editor in chief of Garpâs Risk Professional, said, âA lot of intellectual firepower is being thrown at risk management challenges and a lot of technological firepower as well. Thatâs where I think weâll see a lot of dynamic change in the risk management marketplace and in the risk functions of financial institutions. It will be in analytics and in the application of technology in new, better and more effective ways.â
Leslie Rahl, founder and president of Capital Market Risk Advisors, Inc., said, âThe most important stress testing is stress testing assumptions, correlations and basis relationships. And I think this will be something that risk managers will be putting more emphasis on going forward.â
Guillermo Kopp, executive director and global research fellow at TowerGroup, said, âSunGard has the competency in risk management and has been extending its technology capabilities in developing the architecture to help financial institutions address these issues.â
Jonathan Berryman, director, credit analytics and portfolio reporting, Standard Bank, said, âThere is no doubt that there will and should be a greater focus on risk management, with internal modeling being strengthened and used in conjunction with common sense risk management. One of the biggest priorities will be the restoration of trust in risk measures used and the widespread adoption of best practice measures. Standard Bank should be well placed to meet any requirements of new regulations; the flexibility of SunGardâs Adaptiv credit risk infrastructure provides an open architecture on which to build. We will be adding to this with SunGard's Adaptiv Analytics which will provide us with an advanced grid-enabled analytics engine to help us quickly and accurately run stress and scenario testing across our businesses. This will provide us with a holistic view of our exposures for optimum strategic decision-making."
Pierre Beaudoin, market and insurance risk management advisor at Desjardins Group, said, âSunGardâs Adaptiv Credit Risk allows us to have one consolidated view of our risk across different lines of business to help ensure that we operate with maximum efficiency.â