Comarch Risk Management

Be transparent - risk should be fully understood
RiskMetrics Group

Problem

One of the key problems encountered by institutions whose businesses are exposed to fluctuations in market factor prices, is to identify the market risks present in the managed portfolios. The lack of a comprehensive solution which allows to expose the risk factors faced by the portfolio, or operating complex mathematical calculations, and presenting the values of risk ratios, in a way that allows their rapid interpretation, reduces the efficiency of investment decisions taken. On the other hand, a shortage of appropriate tools to handle or reliable valuation of complex derivatives and structures, limit the use of attractive products of the derivatives' market.

Challenge

Consistently implemented market risk controlling policies allow institutions to minimize the losses incurred on the managed portfolios, not only in times of crisis, but also in times of stability on the financial markets. Using the increasingly popular products of the derivatives' market, for hedging or speculation, poses new challenges for IT systems in asset management, both in terms of their handling and pricing, as well as the need for full transparency and understanding of the associated risks. A key element has become fast identification of areas of investment, both traditional and alternative, with the largest and smallest risk of market price fluctuations. Reported to the investment committees, according to strict standards, it allows to effectively verify the adopted management strategies. Automation of the processes allows you to focus on making key decisions, in terms of risk reduction, which is the most important element of the entire process of managing market risks.

Solution

A comprehensive approach to market risk management is one of the determinants of modern and efficient policy to control risk. The Comarch Asset Management platform solutions provide complete supervison over the market risk management process. The user has access to the functionality of the application that allows for active risk assessment of the managed portfolios, using self-created analysis, and verification of the correctness of the used solutions and management strategies. With support for a wide range of financial instruments, the system gives the possibility to use the complex derivative market products which could hedge the risky areas of business. The application allows managers to take more effective investment decisions, the issuers to increase the range of their products and entrepreneurs to focus on their core business, which translates into an increase in the competitiveness of the institution on the market.

Key features

• Portfolio position analysis - enables active risk assessment of investment portfolios by identifying risk factors, and a clear and quick view of the current situation on portfolios, at different levels of aggregation, according to accepted standards of presentation.
• Risk ratios - offers an opportunity to estimate maximum, potential future losses in the portfolio of instruments, thereby affecting the effective protection against adverse changes in market factors. The correctness of the risk models can be verified with Backtesting functionality, what minimizes  the consequences of incorrect model usage.
• Sensitivity ratios - increases transparency in the identification of the impact of various market factor fluctuations in the value of individual positions, thus allowing effective financial instrument comparision and making faster transaction decisions
• 'What if' scenario analysis - enables active assessment of the impact of potential changes in market factors (including Stress tests) or modifications of the portfolio posistion contributions on the value of portfolio or calculated ratios, increasing the efficiency of portfolio management by maximizing returns and minimizing the risk of investments.
• Derivatives and structured support - increases the competitiveness of issuers by offering innovative products from the derivative market, and gives investors the opportunity to use financial instruments, which could adequately hedge risky areas of their activity.
• Derivatives and structured valuation - allows to calculate the current value of instruments in the portfolio, as well as to estimate the actual price of the instrument prior to its acquisition on the market or directly from the offeror, thereby giving ground for price negotiations with the institution offering the financial product.

Download:

• Comarch Risk Management - leaflet