RIMES hosted their first annual client conference on September 15 in New York City, and invited me to participate on a panel regarding the unification of performance and risk - a topic BISAM has been exploring in some detail throughout 2016. The panel moderated by David Spaulding touched on many of the more practical challenges of this burgeoning topic. In fact, David summarized the dimensions of unification as systematic, organizational and formulaic - essentially the technology, operations, and algorithms that will fuel the continued adoption.
A question from the audience has stuck with me since. What will unification actually look like? What should the industry demand from the solution providers, and what should the solution providers create? Let’s explore.
Risk systems will move from estimated to official results platforms.
Performance systems have historically been forced to distrust the inbound accounting data - the proverbial ”garbage in garbage out” rule. Years of technical expertise have been devoted to improving the quality of inbound data, and improving the quality of performance & attribution results. Risk systems are traditionally holdings-only, to balance the need for operational overhead with results production. With unification, this will change. Data silos will be replaced with integrated & validated data sets. This move will ensure the same data is used throughout.
Performance systems will become much more sophisticated.
Risk systems provide comprehensive portfolio management capabilities: modeling, optimization and what-if scenario analysis tools that allow you to shift and shape your portfolio according to the factors you’re looking to measure. As Performance and Risk providers move past the infrastructure to the usability, these capabilities will trickle down to the performance and attribution result sets.
Your clients will demand more and more sophisticated analysis.
Whether they be internal, institutional, or the general population - your customers will continue to demand more sophisticated result sets. As we’ve witnessed many times in the past (monthly to daily analysis, total to security level analysis, equity attribution, fixed income attribution), the bar is constantly moving. Combine this with a continued spotlight on active vs. passive management, it’s easy to see how the demand for sophisticated risk results by your customers will become a competitive advantage (or deterrent).
RIMES Client Conference Debrief #2: Performance and Risk Integration will Benefit Firms
Know the Risk, Measure the Reward - BISAM at PMAR North America
BISAM Acquisition Serves as a Milestone for Unifying Performance and Risk
Watch BISAM’s Boryana Racheva-Iotova discuss key drivers behind the industry’s move toward Risk and Performance integration.