Two-Sentence Stories About the Crippling Effects of Maintenance Expense

Nothing about risk stays the same. Markets change, models change, data changes, portfolios change and people change. All of these expose limitations to your risk process that may cause chronic maintenance headaches. When more than one happens at once, the pain can cripple your risk process and render your risk reports useless. Now, without further ado, here are your two-sentence stories:

• “Ghost in the Machine”
  A new strategy added to your portfolio contains securities that require a new risk model configuration, but the model takes longer than expected to put into production due to missing input data or limitations to the mapping process. The portfolio manager doesn’t believe your risk reports and it takes 6 months to sort out.
• “The Classic Overpromise”
  The admin promises to deliver a formatted file for your risk system but gets hung-up on FX Options. You spend 9 months trying to get the right information loaded into your risk system.
• “Please Take a Number”
  Your vendor releases a new model for handling negative interest rates (finally!). It will take you another year to implement the changes because IT has other projects ahead of you.
• “But I Just Got the Other One Working”
  A new bank loan model has arrived! It will take you another year to implement it.
• “Completely in the Dark”
  New model schemas were released that fix a current problem with analytics or otherwise improve it. You don’t know if a) you actually use that schema currently, b) when you last changed it and what version you have, c) how long it will take to implement the changes after testing.
• “A Month Down the Drain”
  When you look at an error log you’ve not reviewed in quite some time, it appears that failures jumped a few weeks back. Several days pass before you realize a change in the security master naming convention caused the problem, and fixing it takes another 2 weeks.

Fortunately for risk managers, there is a one-sentence solution to any of these ills: Red Swan Risk has perfected the tools, consultancy, and best practices that make our clients the gold standard of Model Risk Management.

Contact Red Swan Risk today for a demonstration of our efficient solutions for these challenges and more.