Experts attribute the global financial crisis of 2008/09 to the lack of sophisticated technology platforms to measure and control enterprise-wide risks. As an aftermath effect of the crisis, a new era of global regulatory regime started. Some of the industry participants, via EDM Council, collaborated on a novel idea to simplify and standardize the legal and operational taxonomies across trading and risk management areas. When the EDM Council released the Financial Industry Business Ontology (FIBO) to standardize the structure and contractual obligations for financial instruments and legal entities, market participants started to adopt FIBO for securities data management. However, FIBO’s high potential for derivatives risk management and lack of such initiatives in the market ignited the entrepreneurial spirit in Narasimha Kodihalli. A solutions architect for banking technology, Kodihalli immediately recognized the potential of the ontology-based approach in creating a smart contract that would automatically align itself to the market events. The revolutionary idea marked the inception of OpenRisk Technologies, the first organization to leverage FIBO and Artificial Intelligence, to offer collateral management solutions. Today, OpenRisk is emerging as the ‘go-to’ provider for collateral and liquidity risk management.
OpenRisk’s solution to margin management comprises of OpenMargin, a standardized agile platform that harmonizes all evolving needs of the derivatives risk management for the present and future, by rationalizing/digitizing derivative contracts and automating the margin workflow processes. “We apply Natural Language Processing and Machine Learning techniques to rationalize derivatives contracts to extract all legal and operational attributes and create Smart Contracts,” explains Kodihalli, the CEO of OpenRisk Technologies. He further adds that the smart data is not merely the metadata surrounding a contract, but that which embeds smartness to contracts by applying real-time reasoners. Smart contracts align themselves automatically to the market events such as changes in credit ratings, currency exchange rates, and interest rates to trigger measurable and actionable risk mitigation steps. This creates a neural network of data encompassing front to back offices across legal, operational, and IT teams, thereby eliminating any silos between them.
We apply Natural Language Processing and Machine Learning techniques to rationalize derivatives contracts
While working with smart contracts has improved the efficiency in risk management for all users—derivatives traders and collateral operations/ executives team, the User Experience (UX) offered by OpenRisk has also been widely appreciated. Kodihalli mentions that utmost care has been taken to offer simplified data visualization techniques for complex collateral operations. Naturally, the move has won many hearts, including a potential client of OpenRisk based in Germany, comparing the OpenMargin dashboard to a high-end Audi while the industry “drove a car of the 1980s.”
The value proposition brought to the table by OpenRisk has had several organizations seeking its smarter risk management solutions. Kodihalli mentions the instance of a potential client with contract amendment timelines dropping from a few weeks to a few hours, with OpenMargin onboard. This case-study has demonstrated a significant cascading effect on cost savings and process optimization for the client.
As OpenMargin continues to script success stories for OpenRisk, the company has set its focus on liquidity management solutions. As a result, the company is developing a new product called OpenLiquid. Further, OpenRisk aims to eliminate the intermediaries in the financial industry, which would not only result in humongous savings with regard to transaction costs but would also prove to be a huge risk mitigation step by eliminating manual operations, that often compromises on data redundancy and inconsistency. With its solutions set to incorporate all the desired features for effective assessment and management of risks, OpenRisk looks all set to take the market by storm.