A survey by Northern Trust has found that institutional investors and investment managers need to improve their ability to successfully implement risk models.
Around nine in 10 respondents felt that they needed additional skill and experience to effectively model, interpret and utilize results from sophisticated risk models.
Despite the fact that 93% of organizations generally believe that risk models provide useful information, more than half (55%) do not have a risk measurement system today.
The survey also discovered that when it comes to purchasing a risk measurement system, nearly four in 10 said the level of experience on staff to manage the system would be an inhibitor.
“Institutional investors and investment managers are telling us they want valuation model transparency and they appreciate practical experience in using risk models,” said Paul d’Ouville, head of Northern Trust’s C & IS Global Product Management Group. “There is a new reality in the security pricing arena, where complexity has increased and transparency is expected. With their resource challenges, organizations are increasingly seeking expertise from outside firms that can demonstrate practical solutions and help them benefit from the information provided by quantitative risk models.”