Balance Sheet Risk Management System Optimization survey: balancing cost, performance and value

Friday, August 14, 2020 | By James Glueck, Sellside Financial Risk Specialist, SS&C Algorithmics

Balance Sheet Risk Management System Optimization survey: balancing cost, performance and value

During our recent webinar discussing Balance Sheet Risk Management System Optimization, we polled our audience to learn more about the challenges they are seeing during these turbulent times. Based on participant responses to our survey questions, we learned that banks are indeed seeing challenges managing balance sheet risk as the prevalence of persistently low rates, continuing margin compression and increasing credit losses tangibly impact financial performance. A combined 44% of survey respondents cited persistently low rates and continuing net interest margin (NIM) compression as primary impacts resulting from current market conditions, while a combined 35% indicated that credit losses and liquidity constraints were the most troublesome outcomes. This suggests that low rates, compressed margins and continuing credit losses are here to stay for longer than was anticipated before the crisis. The prospect of negative economic growth and higher indebtedness may translate to even lower interest rates, which of course will lead to further pressure on bank profitability.

Graph shows response distribution of financial performance impacts of current market conditions

Technology Opportunities for Optimizing BSRM

The good news is that banks facing cost pressures running mission-critical balance sheet risk management (BSRM) and liquidity risk now have access to new technology offering better performance at a lower cost. SS&C Algorithmics was awarded 2020 Bank ALM System of the Year by  in large part because of its “good use of technology” and its demonstration “that innovation is a continuous process.” As discussed during the webinar, SS&C Algorithmics is a leader in bringing big data, containerization, and cloud to BSRM. Our survey also revealed that 93% of respondents combined cited Big Data (47%), Cloud Bursting (26%), and containerization (20%) while the remaining 7% took aim at Managed Service (PaaS/SaaS) as the most likely near-term technology deployments for BSRM.

Graph shows response distribution of near-term technology deployment for BSRM

Delivering BSRM by Combining Superior Technology with a Powerful Risk Engine and an Innovative User Interface

Full coverage for managing balance sheet and liquidity risk given a global pandemic requires many valuable features, functions and capabilities. While the SS&C Algorithmics BSRM Solution provides comprehensive product and functional coverage, a powerful user interface, an underlying robust and practitioner-renowned risk engine, in-memory risk aggregation and reporting, all built on a superior technology platform with multiple deployment options, we queried webinar participants as to the most valuable BSRM features. In order of importance, session attendees ranked processing and reporting performance (31%), data granularity (25%), user experience and depth of function set (19%), and system extensibility (6%). This ranking of most valuable BSRM features corresponds to the near-term technology deployments reported by session participants where big data and cloud computing were listed as most important.

Graph shows response distribution of most valuable BSRM features

SS&C Algorithmics Balance Sheet Risk Management (BSRM) empowers clients to “do more and spend less” with respect to measuring and managing banking book interest rate risk exposure and structural liquidity risk. With persistent low rates (and the threat of negative rates), continued margin compression and consequential credit losses, banks are challenged more than ever to ensure that they are obtaining sufficient value for their sizable investments in middle office risk systems. Systems that offer flexible cloud deployment and distributed computing capabilities can cost effectively and cost efficiently outperform expensive and cumbersome legacy systems.

Contact us for more information about our BSRM offering or to schedule a product demo. In the meantime, please take care and remain safe as we manage our way through this unprecedented time.

Risk Management

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