UCITS IV Risk Reporting as a Service

Having build up a well-structured function, your risk manager needs to make sure that the responsible governing bodies are able to oversee the risks that the UCITS and/or the Management Company (ManCo) is exposed to. At European level this is covered in Directives 2009/65/EC and 2010/43/EU (level 2 measures), which have been subsequently transposed into local regulation by all member countries. In addition, the European Securities and Markets Authority (ESMA) has issued a number of detailed guidelines and clarifications on the above, notably in their official documents 10/788 and 11/112, while several securities commissions of EU countries have issued additional circulars.

Since several years, our Risk Consultants are working closely with Regulators and our System Developers in order to parameterize and adapt where needed our existing risk engine for producing a set of regulatory reports which is fully complaint with EU directives and ESMA guidelines. In addition, other adaptations have taken place in our systems in order to address specific interpretations in different EU countries. This resulted in a comprehensive reports package which covers all of the following required categories:

• Risk Overview
• Global Exposure
• Risk Decomposition
• Stress Testing
• Back Testing
• Counterparty Risk
• Liquidity Risk

We often witness the provision of such services by our competition to be a fully automated IT process with almost no human intervention. In addition, many fund managers complain that they do not get adequate coverage by risk experts when they need to understand more about the risk calculations and results given, while the additional provision of risk services by the vendor is often impossible. This is sadly driven by competitive pressure to reduce costs, though such practice is clearly not consistent with regulatory requirements.

SYSTEMIC is above all a risk management systems developer and services provider while its scope extends way beyond the mere production of reports in an automated manner. Our staff is comprised of risk specialists who’s tasks include several validations and consistency checks of all numbers produced. Thus our service can also include OTC instruments and exotic options which may require a separate valuation process.

On the other hand, to keep our costs at competitive level without compromising the quality of our service, the majority of our processing takes place in Athens, Greece which offers a highly competitive environment in terms of skills availability at low costs. 

Compared to an internal risk department using a third party system, all our personnel is obviously highly proficient in using our own systems therefore 100% of our time is spent in actual processing and checking the accuracy of your reports instead of figuring out how to use the tools offered. In addition, proximity to the software engineers gives our risk consultants additional flexibility in non-standard cases where enhanced functionality is required.

What are the typical phases that such a project goes through? How long does each last?

Phase #1: System Interfaces & Initialization

Duration 1 - 4 weeks

• At the very beginning of our cooperation we spend enough time to understand  your investment policy, asset classes, and availability of raw information.
• Based on above information, we initialize a database for your funds.
• Subsequently, we work on the system interfaces required to securely automate the initial and subsequent feed of trade/ position information from your fund administrator and/ or your own systems to your database.

Phase #2: Production of UCITS Reports

Duration: On-going

• On the agreed calculation dates, our risk consultants perform all calculations which are required to produce your reports. These include evaluation of risk parameters such as volatilities and correlations across risk factors.
• Following a thorough consistency checking which is completed by a separate team, your reports are published to your dedicated web server
• You may access these report at any time

Do I need to have any special hardware or software?

No, this is a cloud service: You can access all your data, risk reports and other interactive forms using a web browser. We take care of all hardware & software prerequisites, backups, security issues etc.

Where will my data physically be located?

The most cost efficient solution is to use our preferred cloud service providers in Northern Europe, Asia, or North America. 

Alternatively, we may use a data center of your choice in your country of choice or we may even use your own data center under certain circumstances (remote access and security considerations)

Will I have a dedicated risk consultant to speak to when needed?

Yes, one named risk consultant will be assigned to you. He will have the overview of your account and will be fully responsible for all issues.

How much does it cost?

In order to provide a highly competitive cost for the service, we have decided not to charge anything for the use of our sophisticated risk engine. Therefore, the service’s fixed cost is based solely on the estimation of the number of hours that we believe will be reasonably spent for the production of your reports. This depends on the following dimensions:

• Instrument complexity: This ranges from simple Equity portfolios to more sophisticated OTC and Exotic Options Portfolios.

Frequency of reports production. The risk reports may be generated from once a month to several times per day. This has a significant impact on the overall effort required. Regardless of the above production frequency, the reports separately cover each day of the reporting period (assuming that you can provide daily position changes).