Raft posts loss as deal flow fails to materialise

UK-based Raft, which supplies componentised risk management to investment banks, said the downturn in the investment banking sector in 2001, coupled with a £1.6 million increase in overheads, led to the poor result.

"The increased spending on sales and marketing was more appropriate to a larger business. Unfortunately, due to market conditions prevailing in the investment banking sector we didn’t manage to secure the business we thought we would," Sandra Kelly, Raft chief financial officer, told RiskNews.

An IT director at a leading European bank said there would be a move away from using bespoke risk management solutions, offered by companies like Raft, next year. He claimed banks will increasingly be implementing standardised systems.

Raft chief executive Frank Mobjerg said he would immediately cut the firm’s workforce by 10% to reduce costs. He also plans to build more credit and operational risk products in an effort to boost revenues in the next 12 months. Raft has traditionally focused on market risk solutions.

But Raft's results are indicative of the wider downturn in the risk management technology sector. Several companies have been affected by the difficult market conditions over the past year. Technology solutions provider Terence Chapman Group said it had a number of its contracts cancelled as investment banking clients undertook cost-management reviews.

The bank official added that tighter budgets and lower technology spending would continue at investment banks well into the next year.