Top 5 Risk Management Startups Impacting Financial Services
There are many emerging technologies and up-and-coming startups working on solutions for the financial services sector. Let us take a look at 5 promising risk management startups that are impacting financial services.
But before going into risk management startups, let us talk about the major risks that financial services companies face in 2021.
Risks that Financial Services Companies Face in 2021
The major risk is the effect of pandemic-related policies and regulations on the performance of businesses. This is a new risk that emerged recently this year to recognize the environment in which we are living. Other economic risks that emerge as the after-effect of the pandemic include an uneven recovery that is likely to unfold as the economy moves into the “next normal” state and the geographic and sector exposures that some institutions will face as a result. For example, how long will it take for the businesses to recover, and will it ever fully recover to pre- COVID levels?
The other risk is the concern over the current interest rate environment. It will be interesting to note that the concern over this risk declined slightly from last year even as interest rates fell even further year over year. This likely reflects the expectation that ongoing extraordinarily high levels of fiscal stimulus across the world, coupled with increasing confidence that vaccine rollouts will enable an eventual economic recovery and surge, will finally create inflation pressure that will drive interest rates back to more normal (and for financial institutions, more profitable) levels.
Now that we know the top risks financial services companies face this year let us talk about the top 5 risk management startups impacting financial services.
Top Risk Management Startups Impacting Financial Services
- Black Swan Technology
Cybercrime is on the rise, and it is crucial in managing cyber risk in finance. To steal data from banks and FinTech clients, fraudsters are using various schemes. To put an end to data theft, startups around the globe are developing sophisticated and advanced online security tools. These tools include anti-fraud surveillance software and in-advance cybersecurity identification software that detects these threats with greater accuracy.
Black Swan Technology, a US-based startup, addresses the financial and cyber risks that cloud service outages can pose. It has built a Cloud Outage Risk Engine (CORE) to analyze and evaluate the risks of utilizing public Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) for data storage. The company also creates hedging tools that prevent data breaches in the event of cloud outages.
- SPIN Analytics
Banks and financial institutions need to be certain that their borrowers can repay the debt. Inefficient data management and inadequate credit risk modeling tools are two of the problems that banks and financial institutions face during the assessment process. FinTech companies use social media analysis, spending history management, artificial intelligence (AI), and other technologies to address these problems and resolve any issues.
SPIN Analytics, a British startup, has developed RiskRobot to manage credit risk in corporations and financial institutions. This solution uses big data management methods, machine learning, and credit analytics to create advanced credit risk models. It also detects possible flaws in credit risk strategies, improving decision-making.
Asset management, also known as wealth management, aims to reduce or eliminate risks related to the use of assets (both tangible and intangible) by banks or other companies. Startups offer a more advanced approach to asset management by using machine learning, performance optimization, and investment option analysis. It can help established companies address problems by optimizing their asset management systems, maintenance, and depreciation.
Sharpfin, a Swedish company, offers a software suite for wealth risk management. This suite lets users view company assets, manage shareholders’ registers, and set investment restrictions. It also allows users to conduct real-time risk monitoring, create wealth risk reports and calculate common risk measures.
Operational risk management involves the broadest category of risks that banks and financial institutions need to manage. These include country risk, legal risk, environmental risk, etc. Financial institutions need complex software, data mining, regulatory environment monitoring, specific factor analytics, warehousing, and compliance management to help them manage these uncertainties.
Regtify, a startup from Cyprus, develops risk management software to aid financial institutions. Regtify monitors changes in regulatory norms and legal circumstances. It does this by monitoring key performance indicators of corporations and conducting liquidity stress tests. The solution is designed to reduce operational risk.
In financial organizations, risk managers, especially those who offer investment banking services, have several concerns like the volatility of markets, commodity prices, economic conditions, etc. FinTech companies utilize predictive analytics, continuous monitoring, and advanced modeling to detect potential market risks and straightforwardly consider them for elaborating risk management strategies.
The Indian startup company G-Square has to build AI-enhanced market risk analytics for banks, portfolio management entities, and other financial firms. The company employs market data science, deep learning, language processing, and business analytics to get insights and manage market risks.
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