Market risk management product of the year: FIS

Asia Risk Technology Awards 2020

Justin Chan, FIS

Financial institutions are dealing with more complex regulatory requirements than ever before – and, as a result, market risks have become more intertwined. The need to have transparency and the ability to attribute and understand risk sources is of paramount importance.

This is where FIS’s enterprise risk management solution, Adaptiv Analytics, comes in. Adaptiv is a high-performance pricing and risk calculation engine that captures both pricing-intensive and aggregation-heavy risk metrics.

Justin Chan, product director for cross-asset and trading at FIS, says the industry is looking for consistency and comparability across not only market risk measures, but for all risk calculations such as market, credit and collateral risks.

Adaptiv also has an in-memory aggregation cube that can aggregate risk across all types, and provide firm-wide, top-level results down to granular factors. In-memory aggregation allows Adaptiv to be used in a mixed mode, where it values deals for risk and accepts front-office valuations as inputs. This mixed mode is critical to help cope with the parallel challenges of accuracy and performance, driven by the Fundamental Review of the Trading Book (FRTB).

Chan says, as risk becomes one of the central drivers for the capital markets business, the industry is interested in the ability to optimise risk measures and to see incremental impacts due to ‘what-if’ activities. For example, it allows for operations such as switching desks between the internal model and standardised approach or modelling complex changes in desk structure.

“FIS’s highly performant in-memory cube is able to stream aggregation in real-time, while the leading analytics platform is able to compute incremental or what-if impacts on a real-time basis,” he says.

The solution is integrated with Apache Kafka, an open-source stream-processing software platform that allows for processing data in real time. This means market risk can be monitored in real time based on position updates, new over-the-counter transactions and periodic market data updates. Real-time dashboards and limits provide firms with a quick view of risk metrics, thus providing them with control over their trading activities.

Adaptiv can be delivered within a single desktop application and is ideal for sandboxing the whole risk calculation. This gives analysts the ability to model the capital impacts of regulation changes without needing to re-run them at an enterprise level.

The solution supports standard inputs, including from ‘Financial Products Markup Language’ trade descriptions and ‘REST’ API. Calculation results can be analysed through Excel connectivity. The same connectivity allows firms to connect with dashboard technologies such as Tableau and XLCubed to create analysis and reporting dashboards on an enterprise scale. 

The engine covers a wide range of market risk requirements across both the sell side and the buy side. It can perform up to one billion valuations per second on a single server across a wide range of valuation models covering all asset classes, including interest rate, equity, foreign exchange, commodity, energy and credit.

In the past year, FIS has expanded the asset class coverage of the solution to include functionality around physical energy deals.

FIS also enhanced its market data workflow solution to deliver additional proxy types, making it easier to configure multiple proxy steps. This allows firms to better handle the non-modellable risk-factor challenge within the FRTB’s initial margin approach.

Enhancements made to the user interface provides firms with an easy way to configure data flows and create a graphical representation of the process.

FIS is working on several initiatives, including getting its implementation cycle up to Basel IV standards.

It aims to enable its calculation engine to fully use the scalable and elastic computer resource for demanding risk simulations.

FIS is also investing in machine learning-based approaches to guide clients through the vast amounts of risk and simulation data in its platform and data lake, point out anomalies and outliers, and help them understand risk results.

FIS is already present in Asia and Asia-Pacific, Europe, the Middle East, Africa and the Americas, but will continue to support its clients, especially since many regulatory requirements are region-specific and usually phased in by financial firms’ size.

Chan adds that FIS sees financial firms, both on the buy-side and sell-side, that are not only interested in market risk views in business silos, but at the firm-wide level across differing businesses. “FIS’s enterprise risk management platform is uniquely suited to be able to provide a top-of-house risk view, as well as enabling drill down into individual businesses and risk constituents,” he says.

Looking ahead, as the world comes out of the coronavirus crisis, Chan expects to see a renewed focus on modern market risk-monitoring. The focus will be on being data-driven, nimble and cloud-ready, he says.

An Asia Risk judge says FIS has “excellent” product coverage of all asset classes and 250 products. On top of that, the Adaptiv solution has significant computational abilities and is simple to connect to, via Excel or other dashboard technologies, such as Tableau.