The Road to an Effective Collateral Management Program

6 Markets and Securities Services Firms may want to further diversify risk by engaging with non-dealing counterparties and peer-to-peer platforms. However, they will need to take on greater due diligence for these potentially higher-risk counterparties. Peer-to- peer platforms provide a new liquidity pool but may lack the full extent of sophisticated post-trade and collateral management services more traditional dealer relationships offer. It will also be critical for clients to consistently assess how to minimize any collateral drag to their portfolios by assessing the opportunity cost of leveraging specific assets as collateral and ensuring a reinvestment strategy for the cash component of their liquidity buffers.  5 Analyze: Make the Most of Your Data Often legacy infrastructure and technologies are unable to keep up with the new demand for real-time information and dynamic analysis across a number of counterparties and systems. Accordingly, market participants should revisit the foundations of their larger data strategy, and determine where there are opportunities to implement new analytic tools — either buying or building additional resources — to bring clarity to the myriad new positions they will be managing. Firms across the maturity spectrum of adopting data strategies can still benefit from ensuring their fundamental securities master data governance is well developed. Fully leveraging the power of analytics is essential to gaining an information advantage and begins with an orchestrated firmwide effort around information governance and management. For example, firms may want to begin to harmonize data sources and consolidate to a centralized repository, ensuring that each unique product does not use a different reporting method or source. Cleaning and standardizing data are also preliminary tasks that not only enhance operational efficiency, but also underlie effective regulatory reporting automation. Firms will need to guarantee that data systems are built with a capability to link all trading positions and related data, and have a user-friendly interface that can quickly provide insights. Insights Through Analytics • Identify trades in scope • Detect optimal collateral • Determine IM and VM calculations and risk sensitives • Adapt collateral inventory in advance of needs • Forecast collateral requirements and risk- levels • Source optimal collateral based on performance of previous posting • Assess margin impact of posting collateral • Enforce collateral security • Link return on assets with their funding costs Post-Trade Pre-Trade Predictive