State of the art on Liquidity Solutions

State of the art on Liquidity Solutions

Olmo Vazquez, Head of Mirai Advisory USA, Mirai Advisory will be presenting at the Liquidity Risk Management Congress 2017.

Olmo, can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

My professional experience has always been focused on risk management for tier 1 financial institutions. I hold a Master’s Degree in Computer Sciences from Universidad Politecnica de Madrid. I have worked more than 10 years for several leading consultancy firms. Then, I founded Mirai Advisory, with my two partners, where I have been passionately working for the last 4 years.

Mirai is a boutique consultancy firm, specialized in ALM projects.  We are specialized in ALM and Structural Risk.  We provide services for both- business and IT related projects, our sweet spot is where both worlds meet.  Mirai started working in Spain with a small team of six people. Now, we are 90 professionals who provide services in Spain, USA, Mexico and Chile.

From an IT point of view we offer End-To-End services for the deployment of advanced ALM engines. Starting from a strategic consultancy and a Global Project Plan definition up to a BPO – where we simulate the required scenarios and provide detailed reporting for analysis.

We excel in between both worlds, where a deep functional knowledge is required to define complex models, where a technical knowledge is required to implement them.

At the Liquidity Risk Management Congress you will be speaking on your insight regarding – State of the art on liquidity solutions. Why do you believe this is a key talking point in the industry right now?

We have reached a point in terms of Liquidity Management and Regulation where everyone already has a solution and submits all regulatory requirements. The question now is how to excel in the market and be competitive. The technology is the key.
During the last few years, compliance has been the main goal. We have not had what is important on our scope, which is to earn more money for the bank (which is to earn more bank benefits?) Through advanced systems we are providing tools to optimize liquidity buffers, to have better cash flow projections, and to make advanced simulations for balance management.

In your experience, how can financial institutions best manage technology to optimize the balance sheet

Right now, due to all the existing regulation, one has to consider many factors when taking a management decision: how will it affect my current LCR? how will it affect my future LCRs? and NSFR? how will it perform under certain Interest Rate Scenarios? and under different dynamic balance scenarios?

Technology must have 2 main goals:
1. Save time for the business user.
2. Provide better tools in order to optimize the bank’s earnings.

Can you outline the key challenges that come when facing intraday liquidity?

Without any doubt the main challenge is current system infrastructures. We’ve worked with both fintechs and banks, and modern architectures make everything easier. The issue comes from outdated core systems and heterogeneous and disperse information.

Intraday Liquidity must be seen from different points of view:
1- Real Time information about the bank’s position.
2- Intraday cash flow forecast
3.- Intraday Liquidity Stress Testing

Can you give a brief overview of the technology market? And what does this mean for liquidity solutions?

Technology is slow in the banking industry. If you think about the technology we all carry in our smartphones, or how Artificial Intelligence is shaping the automotive industry, or how Big Data is improving processes all around the world; you realize that there are huge opportunities in the banking industry and more particularly in Liquidity and Interest Rate Risk Management. They rely on heavy quantification processes and data volumes. Liquidity technology wise is in its storage.

What, in your opinion does the future hold for liquidity risk professionals, and how can they keep up with the increasing changes in the industry?

The industry has realized the importance of liquidity just recently, and we are just on our first steps. The industry has spent recent years complying with regulators, and now it is time to manage liquidity and optimize balance sheets to ensure the balance between earnings and risk. Ratios are used for regulators to compare between entities and have a control of the liquidity situation. Internal management metrics are necessary to define risk appetite and expand the scope of the ratios (for example, expanding the terms on the LCR…) and project ratios with a dynamic balance sheet to anticipate and fix potential non- compliance situations in the future.

It is time to evolve from a reporter role to a manager role, and technology is here to help in this transition.

The future seems very bright.