Asset Manager Updates Risk Management Platform for Today's Complex Environment

Highlights

THE CLIENT: A large asset management firm

USERS: The risk management team

The buy-side risk management landscape is evolving rapidly as asset managers face the new realities of volatile markets and higher interest rate environments. On top of this, risk managers are expanding their frameworks to include additional factors like climate risk and private asset risk. However, many firms continue to rely on outdated platforms that lack modern tools for integration and reporting. This combination of challenges highlights the need for innovative solutions to keep pace with the changing landscape.

This asset manager was working with a third-party platform provider but viewed the risk management system as outdated and lacking the flexibility to accommodate new risk factors, making it difficult to adapt to evolving market conditions and investment strategies. In addition, the system could not scale well to manage growing data volumes and the increasing complexity of portfolios. Members of the risk management team wanted to look for an alternative solution, while realizing the importance of balancing the need for advanced capabilities with the firm's focus on reducing operational expenses in a fee-compressed environment.

Team members from this asset manager had subscribed to S&P Global Market Intelligence's (“Market Intelligence's”) Fixed Income Analytics and from that experience they reached out to their relationship manager to learn more about the firm's risk management capabilities for the buy side.

Increasingly, members of risk teams are viewing market risk as one piece of the puzzle and need risk management systems that can include other factors in their assessments, such as liquidity and climate risk.

Pain Points

Members of the risk management team faced numerous challenges given an inflexible risk management system and inadequate analytical tools to meet today's changing market conditions. They wanted to find a fast, agile framework that was fully compliant with global regulatory requirements and internal risk management use cases that could solve the following:

• Limited Flexibility: The previous vendor struggled to meet the evolving requirements of the client, particularly in handling diverse asset types, specific modeling needs, and the move to a more data-driven risk team.
• Asset Coverage: The expanding portfolio required robust risk analytics, particularly in niche markets and complex instruments. The previous vendor’s asset coverage didn’t meet the full scope of their needs, especially in areas like climate risk integration and coverage of private markets.
• Outdated Technology Stack: The firm was frustrated with the limitations of the legacy platform. Integration with modern systems and the ability to scale seamlessly was becoming increasingly cumbersome.
• Cost: With budget constraints becoming a priority, the client began questioning the value provided relative to the high cost of maintaining the system.
• Need for Consolidated Platform: The client needed a platform offering a single source of data and analytics without relying on external data providers.
• Need for More Powerful Risk Modeling: The client wanted to enhance their risk modeling capabilities including performing Value-at-Risk (VaR) calculations, aggregation and drill-down features, back testing, and stress testing faster and with more flexibility.
• Measure Liquidity Risk Metrics: They need to measure liquidity risk in conjunction with established market risk metrics.
• Gain Insights on Private Assets: There was a need for insights on how to manage risk for their growing investment into private assets.
• Incorporate Climate Risk Factors: The client would like to incorporate climate risk factors and assess their impact on different scenarios on portfolios.

The Solution

The client faced several operational challenges with their outdated risk management system. These included limited functionality and flexibility, as the system could not accommodate new or customized risk models or support advanced analytics and real-time risk assessments. Integration and compatibility issues were also significant, with the old system struggling to integrate with modern software and newer technologies. Scalability constraints meant the system could not handle growing data volumes or complex portfolios efficiently, leading to performance bottlenecks. Additionally, the user experience was hampered by complex, non-intuitive interfaces, and slow processing speeds, which delayed critical decision-making. Finally, the high maintenance costs and opportunity costs associated with the outdated system prevented the client from leveraging advanced risk management tools to optimize portfolio performance and manage risks effectively.

After extensive testing, the client chose the S&P Global Buy Side Risk solution. As a cloud-based platform, it eliminated the need for local installations and allowed the client to fully embrace the Risk as a Service model. With this solution, the client now has a comprehensive risk management system that consolidates data and analytics into a single source. By leveraging S&P Global’s world-class data estate and advanced analytics capabilities, the solution covers all key risk types: market, counterparty, liquidity, and climate risk. The client also benefits from full transparency, with QA-verified and accessible market data inputs, outputs, and intermediary results that enables dynamic end-to-end risk analysis. Additionally, the modern, cloud-native platform ensures continuous updates and can seamlessly scale to client demands as well as deliver superior performance compared to legacy systems.

The client went into production in July 2024 and has been using other components of our solution for over a year. They have successfully decommissioned their incumbent vendor, which they had relied on for over 18 years. The solution has significantly improved system performance, enhancing the speed of risk calculations and enabling daily risk assessments on their entire portfolio of approximately 1.2 million positions across all asset classes include derivatives and securitized products. The accuracy of risk results has also improved due to more specific full-revaluation modeling functions and granular input data provided by the Buy Side Risk tool. User feedback on the Buy Side Risk solution’s UI has been overwhelmingly positive, highlighting its modern design and intuitive functionality, reflecting our commitment to a cutting-edge, user-friendly experience. Additionally, the client has realized significant cost savings compared to their previous vendor’s solution and continues to meet all relevant regulatory and internal risk management requirements and standards.

Key Benefits

Members of the risk management team were impressed with the solution and wanted to switch from their current provider to Market Intelligence. The solution is now delivering:

• System Performance: The solution has improved the speed at which risk calculations are performed and enables team members to calculate risk on their entire portfolio of 1M+ positions daily.
• Accurate Risk Results: Calculated results are more dependable given the availability of extensive granular data and specific modelling functions.
• User Satisfaction: Together, the modern design and intuitive functionality create a cutting-edge, user-friendly experience.
• Cost Efficiency: Significant cost savings have been realized with the cloud-based risk-as-a-service model that delivers on-demand analytics to quickly drive critical decisions.
• Regulatory Compliance: The solution ensures that all relevant regulatory requirements and standards are met.

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