Real-Time Risk Monitoring Using Sybase® RAP with Event Stream Processing to Monitor and Manage Positions/Exposures in Real-Time
The credit crisis demonstrated to clients and shareholders (and taxpayers!) that financial institutions had inadequate levels of controls for managing risk. Regulators have come under scrutiny for the effectiveness of their controls and are now engaged in exploring and defining new measures to combat the crisis and prevent a recurrence. Governments faced with the toughest economic challenges since WW2 continue to do everything in their power to stabilize the global economy by supporting financial institutions with liquidity and working to ensure availability of credit.
Firms that engage in financial trading are exposed to credit risk (including counterparty risk), market risk, and operational risk. While there has been significant investment in systems to manage market risk over the past 20 years, market events over the past 4 years have demonstrated the limitations of those systems. What’s more, with the focus on market risk, tools for managing credit risk have received less attention. In the trading arena there seemed to be an implicit assumption that counterparty risk was not a major factor. The failure of major trading firms in recent years demonstrated the significance of counterparty risk in a very real way, and has refocused attention on tools for effectively managing credit risk.
The limitations of both types of tools have become apparent in the current market conditions: the information they provide is not timely enough and is too fragmented; it doesn’t provide a real-time consolidated view of the entire trading operation.
These three forces — the heightened sense of risk, the limitations of existing systems, and new regulatory pressures — are forcing firms to look for new approaches to managing risk.