Visualization Lends a Hand to Risk Arena
Data visualization technology has been making a splash in the risk management arena, and is expected to increase in visibility with the recent merger of two of the leading players in the field. Analyzing the flood of information that comes through a financial services firm is a difficult task; therefore, being able to see a snapshot of the data in the form of a chart or graphic
is becoming a welcomed accessory. “One visualization can tell more than many figures and charts,” says Theo van den Hurk, V.P. for market risk policy and research at ABN Amro. The technology looks likely to get a further push forward on the heels of the union of two industry leaders—Visual Insights and Visible Decisions—to make the largest single vendor in the field.
Much of the finance industry expertise comes from Visible Decisions, which has been acquired by Visual Insights, itself a spin-off from Lucent Technologies. Visual Decisions’ In3D and SeeIT applications have been widely used by financial institutions including J.P. Morgan, Morgan Stanley, Nasdaq-Amex and ABN Amro, as well as finance industry vendors such as Northern Trust and MKIRisk. Visual Insights has more expertise in the corporate world with a particular expertise in e-commerce applications.
One area where data visualization has already proven its worth is risk management. “Apart from spotting defective data, it’s a way of examining all sorts of relationships in a portfolio—some will mean nothing but suddenly you might spot an unsuspected correlation,” says Catherine Morley, principal consultant at TCA Consulting in London. “I think it’s a technology with a lot of promise, especially for credit officers who are looking for a flexible online tool with which to examine their portfolios.” It also fits in neatly with a growing tendency among banks to use multiple risk methodologies. Portfolios can be put through two or more models and the output then quickly compared with a data visualization tool.
In3D technology was recently used by ABN Amro to build its “Curve Analytics” application that provides users with an intuitive visual presentation of market data to help understand the dynamics of changing risk factors. The data being examined comes from the bank’s Asset Control, a scaleable, high performance, time series data warehouse for all types of financial instruments including equities, fixed income, FX and derivatives. “A clear picture is required of the bank’s exposure to risk,” said Jos Wieleman, senior V.P. for market risk policy and research at ABN Amro, “This seems a natural area to use visualization.” Van den Hurk, adds, “It really makes it so easy to analyze a lot of data. Risk controllers can quickly see what’s going on in the market, and they can compare it to their analytical models.”
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