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Aggregated risk on demand

Why shareholders need what regulators want

Aggregated risk on demand

Background

Shareholders used to value banks that posted ever higher earnings. The quality – or otherwise – of the back office was hard to measure and made an unlikely reason to buy or sell a stock. The credit crisis changed that.

Firms that couldn’t measure risk failed to manage it, with some disastrous results on their share price and reputations. And when regulators asked banks for their exposures, the answers were too often slow, hesitant and revised ever upwards. Put bluntly, some firms struggled so palpably to answer simple questions about their aggregate exposures that regulators doubted if they knew enough to manage their risks.

New developments in the scale and speed of computing power will help financial institutions deliver the timely, accurate risk analytics and information that regulators are increasingly demanding. Above and beyond that, though, firms have every reason to embrace the emerging technology known as ‘aggregate risk on demand’. As the findings of this paper show, it can help them drive up returns on equity by improving their pricing, optimising their portfolios, conserving capital, cutting costs and enabling smarter, more timely decisions.

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