Financial Risk Analytics: New York Buy Side Risk Roundtable Session Overview

The Financial Risk Analytics team from S&P Global Market Intelligence hosted a comprehensive roundtable in New York on October 18, shedding light on the cutting-edge advancements in risk management for Asset Managers. The session was hosted by Mark Findlay (Managing Director and Global Head of Financial Risk Analytics, S&P Global Market Intelligence) and Luke Armstrong (Head of Buy Side Risk, S&P Global Market Intelligence). It featured insightful discussions on various crucial topics, including the role of VaR and stress testing in today's financial landscape.

Exploring portfolio climate risk

One of the primary highlights of the event was the discussion surrounding the incorporation of climate risk into portfolio management, particularly Transition Risk. Transition Risk encompasses the macroeconomic changes stemming from the ongoing shift toward a low-carbon economy. A critical element in evaluating transition risk is the cost of carbon. Asset managers can gauge transition risk on an issuer level by assessing Earnings at Risk (EaR), which allows them to anticipate potential disruptions in earnings due to climate-related factors.

In addition to Transition Risk, portfolio climate risk analysis also encompasses Physical Risk. This involves evaluating how changes in weather patterns, including droughts, wildfires, and floods, as well as the long-term implications of climate change, such as rising sea levels and temperatures, can impact an investment portfolio. Assets at Risk (AaR) is a valuable tool for quantifying the profit and loss (P&L) implications of climate-related hazards on an organization's physical assets.

Understanding liquidity risk

The roundtable also explored the critical - and highly topical - aspect of liquidity measurement under stressed market conditions. By applying a stress scenario to a portfolio and re-assessing the time required to liquidate assets, asset managers can make informed decisions even during tumultuous market conditions. Additionally, attendees learned about the utility of stressed liquidity surfaces derived from historical data in making more strategic financial moves.

Harnessing technology in buy side risk management

The use of technology in enhancing the role of risk managers in the investment process was another captivating topic. Technology is providing asset managers with innovative tools and resources to better understand and manage risk. By harnessing cutting-edge solutions, risk managers can add value to their investment strategies, resulting in more informed and successful decision-making.

In conclusion, the Financial Risk Analytics roundtable brought together asset managers and industry experts to explore the ever-evolving landscape of risk management. With topics ranging from transition risk and climate-related challenges to liquidity measurement and the role of technology, this event provided valuable insights and tools for asset managers to navigate the complexities of today's financial markets successfully. It's evident that staying informed and adaptive is key to achieving success in the world of asset management.

S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.