Risk Professional - August 2009

mare event that has never happened before, we provide the tools to create that test.”

Financial institutions worldwide are actively seeking such new and emerging risk management tools, according to John Gruber, head of global product management, performance and risk analytics for BNY Mellon Asset Management. He points out that UCITS III – the latest iteration of the European Union’s Undertaking for Collective Investments in Transferable Securities – requires new levels of transparency and risk analysis that are generating “tremendous demand there.” At the same time, Gruber estimates that 10- 15% of his U.S. client base has asked questions or expressed interest in the risk services because of potential changes in regulation of pension plans, endowments and foundations.

Adds IA’s Handzy, “There is a natural inclination to assume that these risk services are only good for hedge funds, but that is not the case.” Although hedge funds tend to be investing in the more complex securities, Handzy says that the same tools can provide valuable insights for a host of other investments, which is precisely what BNY Mellon wants to encourage.

Denise Valentine, a senior analyst with Boston-based research firm Aite Group, notes that “financial firms are under a great deal of pressure to evaluate their risks comprehensively and to communicate them clearly to clients.” She adds that fund administrators and servicers are increasingly able to attract clients by helping them get up and running quickly with branded risk packages such as those offered by IA and New York’s RiskMetrics Group.

NYSE Makes Political-Risk Pitch
By Janice Fioravante

For corporations, political risk is as real as the daily headlines from Afghanistan, Iran or North Korea. It has become enough of a hot-button concern that NYSE Euronext sees political risk analysis as a route to customer satisfaction.

The parent of the New York Stock Exchange and various other markets has been lengthening its menu of ancillary services for its key constituencies. Some relate directly to stock trading, such as algorithms for floor brokers from Deep Value of New York and Chicago. But for listed companies, NYSE Euronext is also touching risk, governance and compliance bases, notably partnering with New York-based political risk consultancy Eurasia Group, which offers the NYSE community exclusive webcasts and publishes reports on the countries and topics covered in each forum.

manage them.

“While the world remains exceedingly risky for businesses, it is by no means incomprehensible,” says Bremmer, noting that investors have come to learn that politics often matters at least as much as economic fundamentals in how global markets perform.

“Listed companies are very interested; they want to know what asset allocations are appropriate in specific countries,” says Joseph Mecane, NYSE Euronext’s executive vice president and chief administrative officer for U.S. markets. He points out that governments have become increasingly involved in economic decision making in the wake of the recent crisis, “so corporate leaders need to better understand the impact of politics and policies on markets and business operations in particular countries or regions.”

The NYSE has “seen the

Joseph Mecane

With governments increasingly involved in economic decisions, cor-

porate leaders need to better understand the impact of politics and

policies on markets and business operations in particular countries.

“We provide analysis of major policy issues, educated forecasts and insights from our global network,” says Eurasia Group president Ian Bremmer, who is also promoting a new book, The Fat Tail: The Power of Political Knowledge for Strategic Investing, written with the firm’s research director, Preston Kent. Their themes: identifying the wide range of political risks facing global companies, and showing investors how to effectively

value” as a customer of Eurasia Group, says Mecane, “and thought exchange members would view it as useful as well.”

Along similar lines, the exchange operator has announced deals with Medley Global Advisors of New York to hold forums and issue “macro policy intelligence” reports with insights on the interactions of politics and markets; and with technology provider Asset4 of Zug Switzerland, to support companies’

management of environmental, social and governance issues and transparency.

“We are assembling a broad product offering so that issuers have a number of things to potentially utilize,” says Mecane.

“Certain products may appeal more or less to certain issuers. The goal is to have a diverse range for companies to choose what is relevant and helpful to them.” Corporations will use the risk management inputs to inform their expansion plans and

overall performance management, as NYSE Euronext gets to differentiate itself from other markets.

“These are small, inexpensive ways to offer listed clients added value,” says Sean O’Dowd, senior analyst at research firm Financial Insights in Framingham, Massachusetts. “A great evolutionary step would be to provide services more customized to an individually listed company profile.”