OpenGamma forecasts top buy-side risk management and analytics trends for 2013
OpenGamma, creators of the first open source analytics and risk management platform for the financial services industry, has aired its views of industry challenges poised to change the buy-side risk management and analytics landscape in 2013.
As regulatory demands, market structure changes, technology access and cost pressures continue to challenge risk managers, traders and quants, risk analytics will play an even more crucial role in day-to-day operations.
As a result, firms will look to make fundamental changes in how they create their risk architecture by embracing customizable cost-effective solutions that provide the level of transparency, flexibility and control needed today, using such solutions as open source to accurately calculate real-time risk and anticipate market challenges.
OpenGamma has highlighted several market changes and requirements that will impact analytics and risk management in 2013, including:
A new level of transparency: regulatory and compliance requirements will continue to pressure the capital markets to guarantee a new level of transparency with regard to risk analytics. As regulators and investors challenge buy-side firms to reduce their risk exposure and assume accountability for all transactions, firms will be forced to invest in critical new tools to enhance their risk infrastructures.
Industry equality: as smaller market participants and entrants from emerging markets make their move to compete in 2013, open source and other solutions will help them level the playing field and gain new access to high-quality analytics tools. In fact, new entrants in certain cases will have an advantage by being “legacy-free.”
Continued cost pressure: dwindling IT budgets amidst the challenges of evolving market regulation, as well as structural reduction in Return on Equity (ROE) in the financial services industry in general, will once again be a major challenge for financial services firms in 2013. Firms must better understand their technology stack, focusing IT spend on their “special sauce,” or those areas that truly generate alpha. As a result, we will see firms move to flexible, low-cost open source solutions to handle the underlying “plumbing” in their infrastructure, saving critical IT dollars for proprietary, alpha-generating projects.
From batch reports to real-time risk: continued market unpredictability will pressure firms to make computational changes and calculate risk multiple times throughout the trading day. This increasing situational awareness stemming from market uncertainty in turn will force many firms to update their legacy risk systems and introduce fast, real-time solutions that can apply the correct metrics to changing market conditions as they occur.
“As the financial services landscape becomes more complex and unpredictable, the industry will realise it needs a new standard for risk analytics. Shrinking IT budgets and the continued call to do more with less to manage unpredictable data volumes and shifting regulatory mandates will drive firms to embrace the most cost-effective, flexible and powerful analytics solutions available,” says Kirk Wylie, founder and chief executive of OpenGamma. “Firms forced to contend with market-wide calls for greater accountability, real-time transparency and improved risk management practices will quickly realise where their dollars are best spent - and the unique value that open source solutions can bring them - leading to the new era of open source in capital markets.”
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