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Intra-day Risk Management Presents a Challenge to both Buy-side and Sell-side

FINCAD’s 2012 annual finance survey uncovers critical market needs

FINCAD released today the results of its third annual finance survey, which demonstrated that intra-day risk management is an important requirement for both the sell-side and buy-side. FINCAD's survey uncovered that 61% of sell-side respondents require risk information on-demand or intra-day, while almost half (46%) reported the same requirement on the buy-side.

Traditionally, running scenarios requires significant bandwidth and time to obtain results. However, more financial professionals are requiring risk information to be available at the pre-trade stage or throughout the day, so they can better respond to changes in the market and adjust their portfolio accordingly. So it was not surprising, when asked about their biggest challenge, that accurate risk assessment topped the list for both buy-side (27%) and sell-side respondents (22%).

“While risk measurement has always been important, it has traditionally been viewed as a cost center. However with the aftermath of the financial crisis and regulations requiring tighter capital requirements and increased collateralization, we’re seeing a significant shift in the importance placed on risk management as a necessity and a competitive advantage,” said Bob Park, President & CEO, FINCAD. “Financial professionals, now more than ever need on-demand-risk and are turning to risk technology to reach their business goals.”

The next most frequently cited challenge by the buy-side (25%) was independent pricing/valuation, while the sell-side (21%) mentioned regulatory compliance. The majority of survey respondents expressed that the regulations will have a moderate to major impact on their business (68% of sell-side and 64% of buy-side respondents). Compared prior year surveys, more respondents stated that regulations will have a major impact and significant changes will have to be made to accommodate new regulations —26% of sell-side respondents felt this way in 2012 compared to only 16% in the 2010 survey. A similar trend for the buy-side also emerged (24% in 2012 compared to only 10% in 2010).