The net impact of the barrage of incoming regulatory requirements on the risk-management function should not be understated. The Fundamental Review of the Trading Book (FRTB) and the standardized approach for measuring counterparty credit risk exposures (SA-CCR) are game-changers for the risk-management and data-management functions.

Data-aggregation tasks to support the XVA desk (which manages credit, funding, and other valuation adjustments) are significant, and the quality of this data is of paramount importance in accurately determining the price of OTC derivatives. Also, the increased prescription for FRTB model approvals means that currently accepted modelling techniques will likely be disallowed and must be replaced; hence, new calculations and new data sources must be found to implement these changes.

This Impact Report examines how firms are tackling transformational activities for risk management and data management, building their current technology and data-management infrastructures to meet the new regulatory and market requirements.

Data Sources, Validation and Flows

Data Sources, Validation and Flows Source Aite Group 2016

At a base level, a risk-data transformation project requires the cooperation of several different functions including (but not limited to) finance and treasury, collateral management, compliance, market and credit risk teams, reference data management, credit valuation adjustment (CVA) or XVA desks, and front-office leads. If a significant in-house build is in the cards, IT must also be engaged early to help scope the project and deliver the various technology components in phases.

This report, commissioned by Numerix and conducted by global research and advisory firm Aite Group, is based on conversations with 15 market participants in risk management, operations, and compliance functions at capital markets firms active in the global derivatives sector, and implementation consultants engaged in supporting transformational activities for risk management and data management. 

This 36-page Report provides cutting-edge examination of:

  • Data Sources, Aggregation Tasks and Flows to Support the XVA Desk
  • Global Derivatives Regulation Examination - Basel III, SA CCR, FRTB
  • Hardware Costs and the Scale of the FRTB Data Challenge
  • Steps for Determining an Effective Approach for Risk Data Management
  • Examples of Transformation Risk Data Architecture Programs

 

ABOUT AITE GROUP

Aite Group is a global research and advisory firm delivering comprehensive, actionable advice on business, technology, and regulatory issues and their impact on the financial services industry. With expertise in banking, payments, insurance, wealth management, and the capital markets, we guide financial institutions, technology providers, and consulting firms worldwide. We partner with our clients, revealing their blind spots and delivering insights to make their businesses smarter and stronger. Visit us on the web and connect with us on Twitter and LinkedIn.

 

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