Risk Management

02:10 PM
John Avery
John Avery
Commentary
Connect Directly
LinkedIn
RSS
E-Mail
50%
50%

The Ripening Case for Managed Services in Risk Management

Risk management will not escape the trend towards managed service solutions. Managers must prepare to take advantage of the emerging technologies and vendor relationships.

Managed services are commonly defined as a broad range of third-party business and IT services including business process as a service (BPaaS), business process outsourcing (BPO), cloud services, and hosting. Across financial services, the resounding industry theme is increased consumption of managed services over the next 12 to 18 months as a way to address budget pressures caused by the cost of regulatory compliance.

A number of trends demonstrate the impact managed services are having on risk management:

  • A 2013 Chartis report projects global 2015 spend will be $31.8 billion on risk technology, but only $5.9 billion on external services. This highlights the magnitude of risk-infrastructure spend and a growing need for third-party cost efficiencies.
  • Chartis has also forecast that European risk management spend will be nearly half the entire spend globally, with an expected growth rate of 12% from 2014 to 2015. Risk technology spend in the US and APAC is expected to increase 16% and 10%, respectively, confirming continued increase in risk management costs, globally.
  • In Q4 2013, both the US Federal Reserve and Office of the Comptroller of the Currency (OCC) provided guidance on how to better manage outsourcing risks, a sign that managed services clearly represent more of a fundamental shift than a trend.

[Read more from Avery: A New Vision for Managed Services in Capital Markets]

Since there is no way to outsource the core responsibilities for managing risk, what managed services opportunities are available to the risk management community?

  • Improved time-to-market for risk and capital management with faster analysis across more scenarios, time horizons, and model complexity by relying on third parties to scale risk infrastructure on-demand
  • Reduced total cost of ownership with third party-managed risk technology and operations that provide economies of scale in the non-differentiated functions in the risk ecosystem, including data management, model control, scenario execution, and processing workflow
  • Balancing the desire to outsource with the need to maintain appropriate controls by using vendor offerings tailored to the needs of the risk community and tailored to regulatory constraints for risk data and customer privacy

Risk managers must position themselves to take advantage of these opportunities by beginning to focus on the following best-practices for managed services adoption:

  • Analyze standing risk technology architectures to identify where managed services can deliver benefits and make it easier to plan the transition to managed services and other more efficient third-party offerings.
  • Leverage existing third-party relationships to design and tailor managed services solutions specific to the individual firm’s risk environment, requirements, and timeline.
  • Develop or update vendor management strategy so it aligns with regulatory guidance and helps increase the capacity to leverage third parties to provide more of these types of services.

While this all may not be top of mind for the risk community right now, the undeniable demand on firms' budgets to achieve regulatory compliance and yet remain competitive will undoubtedly turn more attention to managed services. Risk managers must recognize, prepare, and act to implement strategies that take advantage of the opportunities delivered by managed services offerings; otherwise they risk falling behind.

John Avery is head of managed services solutions, Americas, SunGard's capital markets business. View Full Bio
Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
SovereignIntel
50%
50%
SovereignIntel,
User Rank: Apprentice
7/15/2014 | 3:11:25 PM
Risk Management Partnership
At Sovereign Intelligence, LLC, we are committed to providing the risk management solutions you have described.  Our practice is focused on equity/hedge fund and international law firms who need a trusted partner to address each layer of cyber security, FCPA issues, High Net Value Internet Risk, etc.  Sovereign provides a comprehensive engagement solutions to support the risk management needs of our clients. For example, as cyber security vulnerabilities are address with our Cyber Risk Assessment, we then provide direct breach protection services to mitigate the problems. We also address any exploitation and conduct an investigation- globally as needed, to uncover the culprit behind the fraud, internet scam, or identity theft, or stolen assests.  We conduct worldwide penetration tests, physical security assessments, and solutions for executive travel protection, as well. 

As a vender of these solutions, we pride ourselves on partnering with our clients to provide the right risk mitigation.  I'm happy to provide more information and thank for raising the need for this kind of service. 
More Commentary
Chief Data Officers: Organization Strategy & Cultural Change
Chief data officers are new to the financial services C-suite, but they are facing a number of challenges, including the need for new data governance and execution strategies, staffing, and new organizational structures to enable cultural change.
New York FinTech Innovation Lab Calls for New Entrepreneurial Applicants
Wells Fargo joins 14 other major financial institutions providing mentoring and guidance to the six chosen startups.
Micro Data Challenges in an Era of Macroprudential Regulation
Research and statistical analysis experts at central banks are tasked with developing sophisticated forecasts and models to identify systemic risk. Yet they are spending most of their time acting as data entry clerks, rather than developing these models.
The Perks of 'SmartSourcing' Shared Services in Financial Industry
A breadth of vital but undifferentiated business processes are still being replicated across the industry. They are all candidates for centralization.
Managing Social Media Risk Strategy: Technology Can Only Go So Far
Advanced analytical technologies are an important part of a social media risk management strategy, an Accenture report says, but the technology must be balanced with training and procedures.
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - Elite 8, October 2014
The in-depth profiles of this year's Elite 8 honorees focus on leadership, talent recruitment, big data, analytics, mobile, and more.
Video
Inside Abel Noser's Trading Floor
Inside Abel Noser's Trading Floor
Advanced Trading takes you on an exclusive tour of Abel Noser's New York trading floor, where the agency broker known for transaction cost analysis, is customizing algorithms for the buy side, while growing its fixed income trading and transitions business.