Counterparty Risk: Are We Leveraging Our Tools?

Counterparty Risk: Are We Leveraging Our Tools?


Counterparty risk has long been a source of concern for risk managers. However, the financial crisis brought new urgency to counterparty risk management for risk practitioners, regulators and financial firms alike, as exposure to collapsing giants left the industry reeling. That urgency has been punctuated by the global economy’s current struggles, as firms grapple with new regulations, the European debt crisis and fears of a double-dip recession. The failure of MF Global in October has only heightened concerns about counterparty risk and the continued vulnerability to systemic risk. Current technologies and techniques allow for more sophisticated and effective approaches to counterparty risk than those that fell short in 2008. Yet there are many barriers to successful adoption and implementation, and significant changes will be required, from the global regulatory level all the way down to individual departments at financial firms around the world. If the end goal is a standardized method of quantifying risk exposure among financial institutions, the industry and regulators have considerable work to do. The real challenge is being able to understand exposures in real time across counterparties, markets and asset classes. “The first step is to achieve some transparency within the organization to the information that is already there and is already flowing across different systems—that’s the practical way of making information flow into the right hands sufficiently early,” says Sinan Baskan, vice president of business development in financial markets at Sybase.

Sybase, an SAP company
22 Feb 2012
22 Feb 2012
4 Page(s)
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