Risk management: As easy as ASP
Application service provision has transformed prospects for suppliers of risk-management software. Systems that smaller corporations would once have found too costly, or too feature-heavy, have become available relatively cheaply and in digestible chunks from ASPs on the internet. Even larger companies can see the advantages of the ASP strategy and it is possible that the model will supersede the installed software approach. Boris Antl and Richard Laden check out what is available and forecast market developments
Installing a powerful risk-management software system is a bit like owning a horse. A horse may seem like a wonderful idea to a child, but if you try to keep one in the garage, and have to keep feeding it and mucking out its accommodation, you quickly understand that it might be better to stable the horse elsewhere. And when you realize that you are not getting a chance to ride as often as you hoped - and that the horse is getting long in the tooth - you may well conclude that you don't really need your own horse, and that it might be a better idea simply to join a riding club where you can saddle up from time to time. Like horses, in-house risk-management systems and licensed solutions are extremely costly. Maintaining in-house systems or even installations of licensed software puts a burden on a firm's IT organization. Only large financial institutions and major corporations that deal constantly in the markets have the financial resources to install such systems, the IT personnel to maintain them, and the transactional volume and portfolio complexity to require their use on a daily basis.
With the advent of e-finance application service providers (ASPs), the often-overburdened treasuries of moderate-sized firms and the smaller firms less active in the markets now have access to sources of market information, analytical tools and risk-management systems they could not previously justify purchasing.