Risk Control Limited, provider of advanced risk measurement software to financial institutions, has launched its new Risk Controller solution.
The proliferation of OTC derivatives and structured products has created a requirement for sophisticated risk management techniques that support complex trading activities. Financial institutions are employing ever more sophisticated trading strategies and increasing their use of complex derivatives instruments. As a result, demand has developed for the accurate measurement of risk exposures and advanced risk management support for a range of OTC derivatives and structured products, as well as traditional banking assets.
Risk Controller was engineered by a team of researchers and industry experts, including a member of the Bank of England’s Basel II contributory team, to measure risk over a wide range of instruments. Risk Controller uses sophisticated and rigorous modelling techniques to analyse trading scenarios and compute both portfolio and enterprise-wide risk measures. With this level of detailed and accurate information, firms can make informed decisions on the efficient allocation of capital across divisions.
Consequently, firms have the ability to devise return efficient trading strategies and remain informed on the effect these strategies have on their overall risk profile and the capital required for reserves. The software model was developed through extensive consulting assignments for institutions and industry bodies, including the Basel Committee on the capital charges for structured products in Basel II.
There is sustained demand from financial institutions, including banks, hedge funds and fund managers for support of the full range of trading activity in the market, across all exposure types and asset classes. The risk associated with structured products has resulted in concern that financial institutions are not sufficiently aware of their risk exposure, and have insufficient levels of reserves set aside to mitigate operational loss and comply with regulation such as Basel II.
‘With the growth of complex trading strategies and increased market volatility, Risk Controller provides financial institutions with an accurate and detailed risk model,’ says John Lewis, CEO of Risk Control Limited. ‘Our research team has created a detailed methodology that provides accurate risk measures to improve a financial institutions bottom line. Risk Controller has already been proven by leading financial institutions through our license agreements and consulting assignments. We are confident in its value to financial firms calculating their risk exposures and in turn facilitating operational decisions.’
The industry has voiced its concerns on the need for institutions to improve their capacity to measure exposure to risk, and to understand the scale of potential losses they may face. Risk Controller generates accurate loss distributions for portfolios of complex instruments from detailed multi-step models that avoid gross approximations. The software provides detailed models to the risk manager so they can concentrate on strategies and not the creation of analytics. It is fully transparent; clients are provided with complete information on the underlying analytics and can introduce their own statistical data to run alongside Risk Control’s inputs.
Risk Controller is fully scalable, from an Excel add-in suitable for small portfolios and individual trading desks, a server based system for web delivery, to a grid system, which operates across multiple countries as an enterprise-wide risk management system.
Background notes: Risk Control Limited is a research-led company that supports financial institutions with their risk management, valuation and regulatory compliance requirements. Risk Control’s software has been employed by a wide range of financial institutions, including ECGD, Barclays, EBRD and HVB, and used across a variety of divisions from treasury risk, venture capital, derivatives and retail banking. The principals are industry experts that have assisted in creating banking regulations, and members of the research team advised the Basel Committee on the financial engineering that underlies Basel II. Risk Control regularly consults on risk and operational issues for financial market clients.
