IBM has signed a definitive agreement to acquire Algorithmics for USD387 million, subject to price adjustments at closing. Algorithmics is a risk analytics firm with operations in Toronto, Canada.
The company’s risk analytics software, content and advisory services are used by banks, investment and insurance businesses to help assess risk, address regulatory requirements and make more insightful business decisions. Algorithmics is a member of Fitch Group, which is majority owned by Fimalac, a holding company based in Paris.
This acquisition expands IBM’s business analytics capabilities in the financial services industry by helping clients quantify, manage and optimize their risk exposure across a range of financial risk domains including market, liquidity, credit, operational and insurance risk as well as economic and regulatory capital risk.
In a recent IBM Institute of Business Value survey of 1,900 global CFOs, nearly half indicated that their finance organizations are not effective in the areas of strategy, information integration, risk and opportunity management. The roles of financial officers across all industries are evolving — drawing them into more frequent boardroom conversations about forecasts, profitability and exposure to risks. The survey found that the importance of integrating information has more than doubled, mirroring the exponential rise in information volume and velocity within businesses today. Financial officers are becoming more involved in mitigating corporate risk in all its many forms – whether strategic, operational, legal or environmental.
Across the financial industry, integrated risk management continues to be a challenge — made even more pressing by regulations triggered in response to the global financial crisis. Financial practitioners are tasked with making split-second decisions by analyzing activity happening both within their corporations and in the marketplace. With the combination of IBM and Algorithmics’ analytics technologies, companies can measure and assess operational risk associated with lending processes, market and credit risk exposures. Having this type of transparency and granular insight of financial risk in advance can help organizations meet new regulatory requirements.
More than 350 clients, including 25 of the top 30 banks and more than two-thirds of the CRO Forum of leading insurers, use Algorithmics’ analytics software and advisory services. Clients include The Allianz Group, BlueCrest, HSBC, Nedbank, Nomura, Societe Generale, and Scotia Capital.
"Today’s economic environment demands that financial institutions have more cash on hand, a better understanding of their financial standing and the ability to deliver more transparency to stakeholders," says Rob Ashe, general manager, business analytics, IBM. "Combining Algorithmics’ expertise with IBM’s deep analytics portfolio will allow clients to take a more holistic approach to managing risk and responding to economic change across their enterprises."
IBM’s agreement with Algorithmics demonstrates that companies are looking to integrate independent silos to gain an enterprise-wide view of risks for strategic planning, operations and new growth opportunities.
"It is increasingly important to deliver integrated solutions that provide an understanding of risk and enable effective decision support while meeting rapidly evolving regulatory requirements," says Michael Zerbs (pictured), president and chief operating officer, Algorithmics. "The need to have the right information at the right time is fundamental to developing and managing business strategies. The combination of Algorithmics’ thought leadership, technology, content and services and IBM’s globally recognized analytics business will help a broader group of clients improve their business performance based on a deeper understanding of risk."
Algorithmics’ risk analytics software and services, together with technologies IBM acquired from OpenPages and its recent investments in predictive analytics will provide clients with the broadest range of business analytics solutions.
Algorithmics’ risk advisers will enhance IBM’s Business Analytics and Optimization practice. The Business Analytics and Optimisation team has more than 8,000 consultants including 200 mathematicians with more than 500 patents and a network of analytics solution centres, backed by an overall investment of more than $24 billion in acquisitions in the last five years. Algorithmics’ focus on credit, market and liquidity risk, as well as key customers in operational risk, will strengthen and expand IBM’s risk consulting services.
The acquisition is subject to applicable regulatory clearances and other customary closing conditions. With the closing of this acquisition, approximately 900 Algorithmics employees will join IBM’s Software Group.