NEW YORK & LONDON--(BUSINESS WIRE)--As sell-side firms continue cutting their IT spend in 2013, TABB Group says risk management is one of only two categories where spending is estimated to actually increase from 2012 levels, the other being pricing and reference data.
In order to gain improved risk management, sell-side firms need to simultaneously overcome numerous obstacles such as cultural shifts, process improvements, complex technical upgrades and “data fluency” challenges to achieve more broadly distributed risk discovery and monitoring capabilities, says Paul Rowady, a TABB senior analyst and author of “Enhanced Risk Discovery: Exploration into the Unknown,” being published today.
The market needs “new eyes,” claims Rowady. “The missing piece in today’s risk management stack – discovery, one of four main phases in the risk analysis process, including measuring, monitoring and managing – is a much more powerful interface that allows a wider range of practitioners, both IT and non-IT, to explore all of the data, not just some of it.”
The new report, commissioned by business analytics firm SAS, details the need for and power of visual analytics capabilities specifically from a risk management perspective. With the increasing pace of both data flows and market complexity, new sources of risk are a given. While the market ecosystem is focused on upgrading its risk management capabilities, sell-side firms also need to be aware that the “presentation layer” should be upgraded to an “exploration layer.”
“It’s rather surprising when you consider how much has been invested in the data and infrastructure spending for alpha discovery without much, if any, mention of its use for risk discovery,” says Rowady.
According to TABB, alpha discovery and risk discovery are two sides of the same coin, totally inseparable. “But it is this discovery process that remains grossly underappreciated,” Rowady adds, “that risk monitoring beyond discovery is a function that needs to be ‘baked in’ to each step along a workflow.“
With the change in the magnitude and frequency of data, coupled with the market structure transformation occurring across asset classes and geographies, there are going to be new risks that need to be identified before they can ever be measured and, therefore, managed properly, this is why TABB believes that the tools for enhanced risk discovery, a critical part of today’s risk analytics stack, have yet to receive appropriate consideration given all of these changes.
For this to occur, Rowady says, visual representation and navigation of the accumulated data and output preferably with tightly integrated data aggregation capabilities need to become much more powerful. “In a sense, we all need new eyes.”
The 10-page report with 7 exhibits is available for download by TABB Research Alliance clients and pre-qualified media at http://www.tabbgroup.com/Login.aspx. For a copy of the Executive Summary or more information, visit www.tabbgroup.com. To purchase the report, write to info@tabbgroup.com.
About TABB Group
With offices in New York and London, TABB is the only research and consulting firm focused exclusively on capital markets, based on the interview-based, “first-person knowledge’ research methodology developed by Larry Tabb. For more information, visit www.tabbgroup.com. In 2010, TABB launched TabbFORUM, the online capital markets community for thought leadership covering current industry issues, tracked daily by 16,000-plus professionals.