Razor Risk

Razor Risk – INTEGRATED FIRM-WIDE VIEW AND CONTROL OF RISK Razor Risk is a leading provider of risk management technology and consulting solutions to financial institutions worldwide. Established in 1999, the company was created in response to the complex issues surrounding risk management. Razor Risk recognised that to proactively measure

Editorial Team
May 12, 2021
5 minutes

Tagline

Razor Risk – INTEGRATED FIRM-WIDE VIEW AND CONTROL OF RISK

Mission statement

Razor Risk is a leading provider of risk management technology and consulting solutions to financial institutions worldwide. Established in 1999, the company was created in response to the complex issues surrounding risk management. Razor Risk recognised that to proactively measure and manage risk, it was necessary to manage the total exposure of a financial institution across all of its global activities. This approach has become increasingly important during the economic downturn and following the collapse of major institutions who arguably failed to manage their risk accurately.

Razor Risk is owned by Parabellum (www.parabellum.capital), a private equity fund based in London, UK. We have offices in London, and Sydney offering a highly skilled team of specialists who provide Razor based services across the financial markets and risk management business areas. We have successfully completed installations in many different countries. The company operates on a global risk consultancy structure, drawing upon the expertise of all employees in implementing best practices for clients’ individual needs. This methodology supports an efficient, low cost, minimal risk implementation, allowing clients to maximise optimal risk and reward. Razor Risk Technologies has a 100 per cent successful implementation record for its product, ‘Razor’.

Profile

Razor Risk is a leading provider of risk management technology and consulting solutions to financial institutions worldwide. The company’s Razor framework is used by Banks, Brokers, CCPs and Stock Exchanges, to realise profitability and efficiencies through enterprise-wide risk measurement and control.

Benefits

Razor Risk is a risk platform that delivers the significant speed of performance that is needed to calculate and manage risk in real time across global operations. Razor is used by financial institutions, such as Banks, Hedge Funds, Brokers, Central Clearing Counterparties and Stock Exchanges, to realise profitability and efficiencies through enterprise-wide risk measurement and control. Razor has the superior performance, ease of use, accuracy, adaptability and speed to market that is needed to meet the demands of growing capital markets and the changing regulatory environment. Designed to deliver an integrated enterprise-wide approach to risk management, Razor’s modern design supports credit risk, market risk, clearing risk and liquidity risk in a single system that easily incorporates new or updated risk models.

Razor is:
Adaptable – meets the individual risk policy and analytical requirements of every client.
Accurate – risk calculations are accurate, catering for netting, collateral and economic off-setting.
Timely – provides sub-second response times for the calculation of exposures.
Easy to implement – engineered as an open product with documented APIs combined with experienced consultants to ease implementation.
Supportable – readily supportable within a client’s environment and extendable to meet future business needs.
Return on investment – Razor has delivered a strong return on investment for our clients.

History

Established in 1999.

Focus

The award-winning ‘Razor Risk’ framework provides near real-time and pre-deal calculations that enable management to view their total exposure to individual entities on one consolidated platform. Clients use Razor’s advanced analytics and scenario calculations to achieve best practice in managing risk exposures for credit, market, clearing and liquidity risk within a single application.

Razor Risk accounts for all events and scenarios between the present and some future time horizon. As Razor explicitly incorporates the passage of time, it allows for portfolios that change over time and under differing scenarios. Thus, a more realistic assessment of risk is possible.

A real world example of how the passage of time effects portfolios and risk measurement occurred on January 28, 2008 when Bloomberg.com reported that Merrill Lynch’s value at risk was calculated at $92 million as compared to actual losses from the credit crisis of $18 billion, 200 times larger than measured risk levels.

Razor includes the traditional value at risk calculations, both historical VaR and Monte Carlo VaR. Razor also includes important enhancements to the concept to avoid the kind of risk measurement errors that Merrill Lynch experienced. Challenging issues such as pricing through time, dynamic changes in the portfolio, cash flows being re-invested, default adjusted VaR, marginal VaR and other complex risk measures across all asset classes including non-linear OTC derivatives can be effectively addressed. Standard VaR and credit VaR make an assumption that there is only one time period in the analysis and that the portfolio stays unchanged. Users have this option in Razor, but the best practice multi-period VaR calculation is the direction that the regulators are moving towards because the portfolio evolves over time as some transactions mature and new transactions are added.

Since Razor is a framework and not a risk measure, practitioners can easily incorporate new sources of risk and accommodate innovations in best practice risk management. Razor also assists financial institutions to satisfy their requirements under the Basel Regulatory Framework and the IOSCO Recommendations for Central Counterparties.

Razor has helped improve the way Central Clearing Counterparties, Stock Exchanges, Banks, Hedge Funds and Brokers across the globe measure their risk and manage their capital. Razor is the leading risk management framework around the Central Counterparty 12 (CCP12) members, the industry association of the world’s principal clearing organisations.

Goals

To be a recognised provider of powerful and flexible market-driven risk management frameworks achieving high margin results through direct deployments or as a component of partner delivered solutions