Our Response
Razor Risk Technologies was created in response to the complex issues surrounding risk management. The company recognized that to proactively measure and manage risk, it was necessary to determine the total exposure of a financial institution across all of its global activities.
Since then, the company's software has helped transform the way Banks, Hedge Funds, Brokers, Central Clearing Counterparties and Stock Exchanges in many countries, measure their risk and manage their capital.
Razor Risk Technologies' flagship product, Razor is a high performance valuation, risk management and control product offered to financial institutions. Razor enables organisations to effectively address their economic capital, market, credit and liquidity risk management requirements, both on an enterprise and a departmental basis. Razor clients include ANZ Bank, Australian Stock Exchange, Calyon, Federal Home Loan Bank Pittsburgh, HSBC, International Derivatives Clearing Group, KPEI, LCH.Clearnet Group, the Man Group plc, Royal Bank of Canada and Treasury Corporation of Victoria.
Our award-winning Razor Risk framework for valuation, risk/reward measurement and management accounts for all events and scenarios between the present and some future time horizon. Since the framework explicitly incorporates the passage of time, it allows for portfolios that change over time and under differing scenarios. Thus, a more realistic assessment of risk is possible.
A real world example of how important the passage of time effects portfolios and risk measurement was given on January 28, 2008 when Bloomberg.com reported that Merrill Lynch's value at risk was calculated at $92 million compared to actual losses from the credit crisis of $18 billion, 200 times larger than measured risk levels. Razor includes the traditional value at risk calculations, both historical VaR and Monte Carlo VaR. Razor also includes important enhancements to the concept to avoid the kind of risk measurement errors that Merrill Lynch experienced. Razor's forward looking; scenario-based framework produces risk and reward measures that explicitly capture the passage of time. Consequently, challenging issues such as dynamic changes in the portfolio, cash flows being re-invested, default adjusted VaR, marginal VaR and other complex risk measures across all asset classes including non-linear OTC derivatives can be effectively addressed. Standard VaR and credit VaR make an assumption that there is only one time period in the analysis and that the portfolio stays unchanged. Users have this option in Razor but the best practice multi-period VaR calculation is the direction that the regulators are moving towards because the portfolio evolves over time as some transactions mature and new transactions are added.
Razor is a comprehensive, yet flexible, methodology that links disparate sources of risk and provides a means to calculate the risk/reward trade-off within a single, unified framework. Since it is a framework and not a risk measure, practitioners can easily incorporate new sources of risk and accommodate innovations in supervision and risk management best practice. Neither practitioners nor regulators are 'locked' into formulaic approaches to risk.
Razor is the latest milestone in Razor Risk Technologies' quest to advance risk management practice and oversight. The company believes that this new framework will profoundly affect the way institutions manage risk and allocate capital, leading to better and more extensive risk management worldwide.