Risk Management Experts
Key topics
Risk Management, Credit Risk, Market Risk, Counterparty Risk
Biography
Mat Newman has been working in the risk area of the capital markets industry for over 20 years. He is currently vice president, product management, Adaptiv, where he has responsibility for the product direction and management of SunGard’s Adaptiv solution suite, the part of SunGard’s capital markets business that focuses on risk management.
Mr. Newman joined SunGard in 2002 from Celoxica plc, where he was senior vice president responsible for technology strategy and execution. Prior to that, he worked at Accenture, Oliver, Wyman & Co. and Alpha-Numeric Developments, specializing in risk management projects across the capital markets business. He holds a BA in Mathematics and Philosophy and two MScs in Computation from Oxford University.
Commentary
Financial services firms are in the curious position of responding to regulatory initiatives while having to wait for much of the detail around them to become better defined. What is clear, however, is that there is an aggressive timetable for many of the new changes.
Central counterparties will fundamentally change the OTC derivatives market infrastructure landscape. There is much work to be done to ensure connectivity is in place and the right business processes are automated. But as well as the nuts and bolts of CCP connectivity, the new paradigm alters much of the underlying business model, with margin requirements adding to the cost of doing business. In time, we are likely to see the choice of CCP becoming a negotiating point among OTC participants since each side will have different pre-existing positions with the various CCPs and hence will incur different incremental margin obligations for different clearing venues.
The Basel III reforms greatly increase the cost, quality and quantity of required regulatory capital. As this is a scarce resource, capital planning will become ever more important, and being able to quickly and accurately assess the incremental cost of capital for new trading activities will become a key competitive advantage.
Reading between the lines it is clear that regulators will expect banks to comply not just with the letter of the law, but also with the underlying intent and spirit, and for risk management to have a more powerful voice inside the organization. This is making banks invest more in drill-down and reporting tools so that they can fully understand not only the headline risk numbers but also the sources and drivers of risk, and communicate this effectively to the front office and senior management.