Financial directors at various organisations face an uphill battle, forced to contend with ever-stricter regulatory requirements, increasingly volatile markets and often unpredictable macroeconomic events under the backdrop of slow economic growth and historically low interest rates.
The UK’s planned departure from the EU and President Trump’s administration threatening to radially renegotiate international trade agreements create unwanted headwinds for financial directors best laid plans.
Meanwhile, tougher regulation aimed at reducing financial systemic risk does so at the expense of companies bottom line. The ever-rising cost of compliance has helped to drive down returns on equity and left businesses desperately seeking methods for reducing operating costs.
Companies large and small must also manage a whole manner of financial risks including fluctuations in foreign exchange rates, as well as credit, commodity prices and even operational risks like fraud. When financial risk management decisions are executed correctly it can save businesses millions and help weather tough economic times, but when done poorly have the potential to bring a company to its knees.
In this climate, businesses are increasingly concerned about how they manage financial risk. But managing financial risk and optimising capital is not just about good accounting and keeping the books balanced. Risk management decisions are often executed via complex investment, borrowing and hedging transactions. Having completed these transactions, businesses must ensure these undertakings are adequately accounted and reported. On top of all this, financial risk decisions must also satisfy global investors that increasingly want to see companies deploy capital efficiently and improve cash flow management.
To do this, financial directors must put in place robust financial risk frameworks to ensure their organisations not only meet the compliance demands of regulators, but enhance financial performance and insulate the business from economic shocks; maximising value for stakeholders.
The challenge with cultivating strong risk management systems is in their complexity and inherently high cost. Many organisations still have very manual processes in place, with often poor, disconnected data and segregated IT systems. The high cost of compliance and implementation limitations from legacy IT systems means that despite stricter regulations many businesses are often scrambling to keep pace and slow to adopt new technologies. Thankfully, there is a growing number of innovative tech companies offering cost-efficient financial risk management software solutions, so here is a review of the top 10 financial risk management software providers in 2018:
EM Applications (EMA) uses machine-learning in conjunction with algorithm based multi-factor modelling and generalised autoregressive conditional heteroskedasticity (GARCH) in order to predict market volatility and correlations across a businesses traded assets. By doing so, it helps companies better assess and manage the risk profile of their respective portfolios.
EMA systems are capable of running risk analysis and reporting to create optimal performing portfolios using its proprietary algorithms. Its software can handle a single or multi-asset investment portfolio comprised of FTSE-100 listed stock, bonds, derivatives or other debt instruments.
Numerix’s CrossAsset software offers a variety of financial modelling techniques and risk management solutions that allow organisations to better price various financial instruments in order to come up with market-consistent valuations. Furthermore, its software is highly flexible, making it simple to deploy for companies. The high degree of flexibility also allows businesses to integrate Numerix’s models with its own, allowing for unified pricing and better risk profiling on fixed income positions or more complex instruments found in their portfolio.
“Flexibility is typically the Achilles heel to accelerated performance, when you think about the terabytes of data that need to be generated for revaluations and risk on a real-time basis,” said Steven R. O’Hanlon, Chief Executive Officer & President of Numerix. “We took on this challenge and through our CrossAsset Integration Layer and the CrossAsset Server; have been able to preserve the flexibility that front office quants require while meeting the performance benchmarks for traders and risk management operations.”
Protecht offers commercial credit risk management (CCRM) software solutions that allow businesses of all shapes and across various industries to centralise lending data in one place. The software provider’s platform gives clients access to borrower entity structure, loan approval information, financial statements analysis, credit risk profiling and even reporting tools all accessible from a single digital platform.
Protecht CCRM software offers financial directors to cultivate a strong and robust risk framework capable of covenant and overall portfolio monitoring, as well as the ability to easily pull data and analytical reports to deliver insight to all levels of management within an organisation.
Another strong and highly scalable credit risk management platform is Actico. This platform has garnered interest from banks, financial services providers and multinationals. A key and unique feature of the software is its built-in simulation environment which can replicate changes to ratings models before being executed in the actual market. These simulated models can even be tweaked and stress tested all within the simulation environment to ensure credit strategies are optimal prior to implementation.
Other major software features include the capturing of financial statements and greater flexibility for designing internal rating and risk scoring models to help organisations operate more efficiently and obtain a competitive advantage over rivals in the market.
MetricStream, the independent market leader in enterprise and cloud applications for governance, risk and compliance (GRC). The company offers its M7 Operational Risk Management application which provides a plethora of innovative tools aimed at helping companies establish better operational risk management practices. The application is easily integrated and as such is able to harmonising risk management processes, improving risk-related decision making and, in turn enhancing financial performance and limiting losses. It also helps protect critical investments and maintain corporate brand equity.
“M7 enables high performing organizations by making GRC simple, intuitive, and more deeply embedded across the enterprise and extended ecosystem,” MetricStream CEO, Shellye Archambeau said. “M7 gives our customers real-time intelligence that they need to anticipate risk, and balance opportunities effectively.”
Vertica offers a range of financial risk management tools to help everyone from financial institutions to online retailers gain greater insights from the billions of data points and vast swathes of information bombarding companies, all with the aim of improving understanding of financial performance and risks.
Its SQL-based analytics platform database is capable of supporting organisations in seeing how big data and the bigger picture can impact their organisation in a much more granular fashion by running simulations to decipher how a financial crash will impact its various asset holdings or result in borrowers defaulting on their loans.
Murex’s MX.3 platform is built to bridge the gap between the capital markets operators front office and risk management systems. The platform offers cutting edge risk solutions that enable financial services firms to participate in capital markets while handling complex and far-reaching regulatory requirements. It enables efficient management of market, credit and liquidity risk across all asset classes.
The software is capable of dealing across numerous asset instrument and classes, which provides organisations with a lot of flexibility and makes the software easily integrated within an institutions existing IT and risk infrastructure.
“Over the past few years, we have focused on creating risk solutions that evolve with the market, paying particular attention to the regulatory challenge our clients are facing.” Marwan Tabet, Head of Enterprise Risk Management Practice at Murex said.
AutoRek offers an automated financial control framework that reduces the cost, improves control and enhances operational risk. Their solutions allow organisations to monitor and analyse internal operations and processes. Its software allows financial directors to manage accounts, regulatory reporting and even preparing the company budget. By adopting a single, automated repository for data, AutoRek can provide financial controllers with forward looking forecasts so that they can act in a timely manner and mitigate any risks via effective financial management.
By employing AutoRek automated and auditable solution it can help businesses reduce costs, replacing or often dramatically reducing company headcount due to a reduction in manual processes and clunky legacy systems.
For companies and leading financial institutions there is a myriad of market and regulatory challenges that must be contended with on a day-to-day basis. Organisations must constantly find new ways to increase revenues, maintain and report adequate capital ratios and do so in a cost-efficient manner. AxiomSL’s RiskMonitor software not only meets the demands of an ever-evolving regulatory environment, but its various modules cover everything from credit and liquidity risk to earnings at risk and risk-based economic capital.
Broadridge’s Risk Master software seamlessly mixes advanced risk management tools and various asset class data to help businesses better understand and assess their portfolio, its exposure across various markets and how to mitigate the impact of external shocks. The software platform supports numerous financial asset classes including equity, fixed income, credit, foreign exchange and commodities.
Risk Master is packed full of features that organisations can intelligently access and which are extremely customisable, including simulation environments where asset reporting and other risk factors can be tested on the fly to deliver accurate risk profiling.