The treasure trove of data can devise new improved ways to mitigate risks.
How to reduce the range of risks and better grasp the reins of the business? Though data is being gathered, and pushed through the highly advanced risk analytics tools, how do the risk insurers utilize these insights to boost improved decision-making procedures that affect the business future and potential losses?
Global risks are burgeoning; companies of all sizes are seeking the perks of risk analytics and management. Smart companies are realizing the change is coming from people as well as recent technological breakthroughs, including Big Data and AI. And CEOs are improvising their risk teams, and transforming them into perceptive strategic advisors to address budding dangerous threats like cybercrime.
Modern risk analysts have accurate knowledge about risk, artificial intelligence and cyber security – so, it’s time they get an opportunity to show a greater presence in the stoic boardrooms as strategic advisors. AI, the cutting-edge risk analytics tool surfaced out to enhance the inexorable march of big data. As such, their importance in the organization in assessing risk has greatly increased.
Last year, Britain opted to leave the European Union – and that created spiking fluctuation and acute market uncertainty across the globe.
Most of the investors out there know investment involves risks and rewards, just like head and tail in a coin and so do the analysts. Higher the risk, better are the chances to gain potential rewards. As a result, it is critical for both an investor and analyst to understand the true nature of market risks that influences the market conditions and controls the shooting volatility and the ways to manage those risks.
Common Market Risks
Relevant market risks depend largely on the nature of investment as well as geographic boundaries. Some of the key market risks are as follows:
Interest Rate Risk – It is the risk of a decrease in the value of a security owing to changes in interest rates. The rate of change of interest rates is inversely proportional to bonds – based on a rationale that a bond is the future security of a healthy stream of payments – hence as interest rate rises, the price of the issued bonds decreases.
Inflation Risk – It relates to the risk that gets affected as the prices of goods and services increases reducing the value of money. This risk results in affecting the value of investments in a negative way. It decreases the purchasing power of money, thereby reducing the value of investment. Sometimes inflation risk is also known as Purchasing Power Risk.
Currency Risk – This type of risk arises when your money needs to be converted to a different currency for investment purposes. Here, a small change in exchange rates between the home currency and US dollars can affect your investment return.
Liquidity Risk – It refers to the risk of not being able to fulfill certain investment requirements quickly for a price that determines the true value of the asset. Sometimes, one may face difficulties in selling the investment due to a lack of buyers, resulting in a drastic decrease of investment value of that product until someone is ready to pay for it. Foreign investments, over-the-counter markets and small-capitalization stocks are some of the high liquidity risks items.
Sociopolitical Risk – The socio-political environ, such as war, terrorist attack, election and corruption affects the market conditions. They affect investor perceptions, resulting in severe oscillation in stock prices.
Managing Market Risk
Well, you can’t control the market risks from taking a front seat in your financial life, though you can take some steps to manage and mitigate them.
As globalization seeped through all leading economies and market segments, a majority of fintech institutions started realizing the criticality of an enhanced operational risk, especially related to cyber-security, IT failures and data theft. Amid this, cyber risks and data theft issues posed key challenges, followed by IT failures and outsourcing issues. The revolution of digitization did many goods to our society, but the moment banks got dependent on single computer networking setups, the vulnerability of confidential customer data leakage multiplied. As a result, the need for data analysts and market researchers spiked up – they are the trained souls who possess both the experience and expertise to tackle diverse investment portfolios for clients in the best way possible to fetch maximum profits.
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Risk analytics tools boost operational efficiency. But do you know what tools to implement to derive the best results?
With the burgeoning demand for big data all over the world, major corporate houses are taking risk analytics – the process of collecting, analyzing and measuring real-time data to forecast future risk for improved decision-making – to a new high.
The use of data analytics is robustly expanding in the financial sector – and the risk landscape is changing pretty fast. Every day a new innovation in the field of risk analytics is making its way, and sometimes some new risks and its respective strategies are popping up just around the corner. The rise of big data, artificial intelligence and advanced analytics helps companies gain valuable cognizance from data. Computing power, the Internet of Things, drones and machine learning are some of the latest new-age tools to assist companies in taking better decisions, hence increase future profitability. Alike, risk managers implement market risk analytics and big data to manage their day-to-day work activities, while identifying, ascertaining and mitigating risks.
We are back again with some great news! Technology enthusiasts and hardcore industry professionals got another reason to cheer for DexLab Analytics, as we feel extremely delighted to announce our new Market Risk Analytics and Modelling online live sessions. We welcome hundreds and thousands of young, aspiring data enthusiasts from various parts of the country who are driven by hunger, passion and robust dreams of a data-friendly future to get enrolled in our online course on Market Risk Analytics using SAS. In our quest for expanding our horizons, these types of analytics course play a significant role.
Recently, Market Risk Analytics have gained a lot of prominence – a lot of tech pundits and industry practitioners have repeatedly emphasized on the importance of having sound market risk management policies and strong internal controls. Especially, since the global financial crisis, the critical aspect of risk management analytic has doubled.