Alan Greenspan: US economy not accelerating by any means

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Former Federal Reserve Chairman Alan Greenspan told FOX Business on Thursday that the U.S. economyis poised to slow down very soon.

“Just wait until the fourth quarter number comes out, it’s going to be down around 2.5 percent,” Greenspan said during an exclusive interview with Maria Bartiromo. “We have monthly data which suggests that we are slowing down, we are not going negative, but we are definitely slowing down – the rate of growth as we go into 2019 probably at a 2 to 2.5 percent pace maximum.”

Gross domestic product (GDP) increased 3.5 percent in the third quarter, according to a revised estimate from the Bureau of Economic Analysis, but Greenspan said gross domestic savings, which consists of savings of the household, private corporate and public sectors, is a critical factor in determining his outlook.

“Gross domestic savings is the key funding to capital investment in the Unites States, and as a result we are seeing capital investments slowing down,” he said.

Earlier this week, White House Council of Economic Advisers Chairman Kevin Hassett told FOX Business a capital spending boom is giving the U.S. economy momentum.

“A capital spending boom like the one that we’re in usually takes three to five years,” he told Bartiromo. “We’ve had about a 10 percent increase in capital [spending] since this time last year and that should continue if it’s a normal spending boom for the next three to five years.”

However in Greenspan’s opinion, although a recession is unlikely, the U.S. has entered a period of stagflation driven by runaway spending and entitlement programs.

“We are not funding our entitlements and as a result we have this huge deficit – [a] trillion dollar budget deficit,” he said. “You can’t exist with that sort of phenomenon without inflation re-emerging itself.”

The annual inflation rate in the U.S. fell to 2.2 percent in November from 2.5 percent in October, according to the Labor Department.

Julia Limitone is a Senior Web Producer for FOXBusiness.com.

This material may not be published, broadcast, rewritten, or redistributed.

©2018 FOX News Network, LLC. All rights reserved.

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Wall Street Erases the Line Between Its Jocks and Nerds – WSJ

Wall Street Erases the Line Between Its Jocks and Nerds
— Read on www.wsj.com/articles/wall-street-erases-the-line-between-its-jocks-and-nerds-1534564810

JPMorgan’s Dimon Says Violent Moves in Treasuries Are Possible – Bloomberg Business

Jamie Dimon, chairman and chief executive officer of JPMorgan Chase CEO says the Treasury market is one thing he worries about

Comments aren’t a prediction, just a possibility, Dimon says

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Jamie Dimon, JPMorgan Chase & Co.’s chief executive officer, said the bank will be prepared for the possibility that Treasury prices move violently when interest rates rise.
“The one thing I do worry a little bit about, by the way, is Treasuries,” Dimon said Friday at a conference in New York sponsored by Barclays Plc. “Interest rates have been so low, for so long,” he said, adding that some traders and their managers have never experienced a rising interest-rate environment.
The U.S. banking system is much safer now because of higher capital and business diversification, said Dimon, 59, responding to a question about whether the next U.S. credit downturn would come from banks or non-banks. In April, he called volatility in the Treasury market in late 2014 a “warning shot” to investors.
“So I wouldn’t be shocked to see 10-year Treasuries, when rates are going up, people change their mind, they change direction, that they will be violently volatile and go up much faster than people think,” Dimon said. “I’m not predicting that. I’m simply saying in the back of my mind, I think that’s a possibility.”
His comments followed the biggest single-day rally in six years for two-year Treasuries. After the Federal Reserve announced Thursday it would keep interest rates near zero, yields on the policy-sensitive note dropped by 13 basis points, the steepest decline since the central bank announced it would expand its bond-buying program in March 2009. The rate on 10-year notes fell 10 basis points to 2.19 percent.
JPMorgan has “about the same” third-quarter trading-revenue trends as other banks that have disclosed expectations at the conference, Dimon said. Executives from Bank of America Corp. and Citigroup Inc. have said they probably will report a 5 percent drop in third-quarter trading revenue.
“September is still to go, so who knows,” Dimon said. “I think people are massively over-focused on those numbers.”
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Global Financial Services Firms Join New Open Messaging Network

London and New York, NY – Markit, a leading, global financial information services company, today announced the launch of an open messaging network that will enable people in all parts of the global financial services industry to communicate and share information seamlessly.

To date, communication between market participants has been hampered by the lack of system interoperability.The new network removes barriers to industry communication by allowing messaging platforms, critical to price discovery and pre and post trade operations, to connect to each other.

Markit Collaboration Services allows users to see availability, send instant messages, use video and chat rooms, and exchange documents across disparate messaging platforms.Federating messaging platforms makes it cost effective for institutions to offer the benefits of a cross-industry collaboration network to employees throughout their enterprise.The federation service is powered by NextPlane, the market leader in cloud-based unified communications (UC) federation services for collaborative business communities.

The new network also provides the first open directory for the financial services industry, enabling people to find, communicate and collaborate with one another.The messaging and directory services can be embedded in third party applications, workflows and other networks, extending the functionality of trading, processing, research and other applications.

Thomson Reuters is a founding member of the network and will federate its instant messaging tool, Thomson Reuters Eikon Messenger, with the network. Thomson Reuters Eikon Messenger was built using open-based standards to offer a secure, federated messaging system that facilitates collaboration across the financial markets.It already connects to other

messaging platforms such as AOL and Yahoo!. It has a community of over 200,000 financial professionals from more than 170 countries that will be able to communicate across the new network.

BofA Merrill Lynch, Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase and Morgan Stanley have also joined the network and will use the federation and directory services at the enterprise level. These firms employ more than one million people worldwide, all of whom are eligible to use the new network.They will also invite their customers to join the network.

Lance Uggla, chief executive officer of Markit, said: “We’re excited to launch this new collaboration network which is the first of its kind.Our aim is to help financial market participants become more efficient in the way they communicate and share information. By offering them an interoperable collaboration system, we will change how financial markets operate.Having

Thomson Reuters and many of the industry’s major players as part of the network underlines the value of our proposition.”

David Craig, president of Financial & Risk at Thomson Reuters, said: “Thomson Reuters was an innovator in open messaging, launching one of the first instant messaging services specifically designed for financial markets 11 years ago. We are excited to work with Markit and the industry as a founding member of this new open messaging initiative which aims to break down the last barriers to cross-industry communication. This will significantly help the industry and will enable our customers to connect to their clients and counterparties regardless of the messaging tools they are using.”

Perry Vais, cohead of quantitative strategy at BlueMountain Capital Management, said: “We envision using the new network to connect easily with trading desks, prime brokers, research departments and others in the market.With a single point of access to multiple messaging systems, the network helps us work with anyone and minimises the technology required.”

Zar Amrolia, cohead of Fixed Income & Currencies at Deutsche Bank, said: “Deutsche Bank is at the forefront of emerging technologies that drive market efficiencies. This new network allows us to connect disparate systems and improve the quality of communication and therefore service we provide to clients. We welcome any initiative that improves access and communication across markets and with our clients. The service will refine our back office technology footprint, whilst bringing efficiencies to our client facing franchise across the bank.”

Steve Grob, director of group strategy at Fidessa, said: “The use of intelligent messaging within trading applications is a definite direction of travel for the industry. Markit’s initiative means that we can work with those of our customers that are also on Markit’s new network to build intelligent workflow messaging across our buy and sellside trading community.”

Jim Toffey, head of E-Markets at GFI Group, said: “We work with dozens of dealers and today we rely on multiple systems to communicate.The ability to use one platform to reach many customers is extremely valuable.We also need to verify that we are working with authorised representatives at our customers and having access to a single, global directory that is validated by firms on the network is a major advance for our business.”

Heidi Johnson, managing director and head of Collaboration Services at Markit, said: “All participants in the financial markets are invited to join this open network.We believe our technology will transform the way people communicate, access information and connect systems and people.Having a technology-agnostic network will open up exciting new ways to connect systems and people.”

About the network

Markit Collaboration Services is open to any participant in the financial industry, and thousands of buyside firms, banks, exchanges, interdealer brokers and vendors are expected to join the network.

The ability to federate enables firms on the network to optimise the investments they have made in messaging and compliance infrastructure.Federation supports all XMPP and SIP-based

messaging, including Thomson Reuters Eikon Messenger, Microsoft Lync and Cisco Jabber.

Farzin Shahidi, founder and chief executive officer of NextPlane, said: “We believe that organisations should be able to communicate and collaborate seamlessly

with one another in realtime, regardless of their underlying unified communications and messaging platforms. We are pleased to provide the scalable, many-to-many UC federation service which allows the financial services industry to collaborate in realtime.”

The network includes a security and privacy framework that provides participating firms with full ownership of their messaging.Message content is encrypted and is not stored by the network.

The network is supported by the Vantage governance platform by Actiance, the gold standard for active compliance which ensures all interaction on the network adheres to member company policies and FINRA standards.

Steve White, product manager at Actiance, said: “Social tools and industry-focused networks clearly help drive innovation and productivity across broad and often geographically dispersed user groups.We believe the open standard approach taken by Markit, coupled with the necessary compliance capabilities provided through Vantage, will be well received in the financial services industry.”

For more information, please visit:www.markit.com/Product/collaboration-services

For More Information, Please Contact

Alex Paidas

Director, Markit

Tel: +1 212 205 7101

alex.paidas@markit.com

Why Thomson Reuters and Markit could give Bloomberg a run for its money

The privacy scandal that shook Bloomberg in May could be coming back to bite it. Today, Markit and Thomson Reuters formally announced their new messaging system for finance professionals, Market Collaboration Services. It seems designed to compete with the chat function on Bloomberg terminals, to which Bloomberg owes part of its dominance as a data provider. The two companies said today that Bank of America Merrill Lynch, Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan Chase and Morgan Stanley were all on board.

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We’ve written before that Thomson Reuters will have a hard time unseating Bloomberg. But traders, bankers, and other financial services professionals we’ve spoken to over the last few months have raised a number of points that lead us to believe that Thomson Reuters and Markit could be more successful than we thought:

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Concerns about snooping and data privacy really shook bankers up. In May, Bloomberg admitted that its reporters had access to information about its customers’ usage of their Bloomberg terminals, and there were complaints that they were using it to write stories. Though the fury may have faded, the message has not; third-party technology can pose a threat to the secrecy of the firm. The Markit/Thomson Reuters offering was created in close collaboration with banks and is more customizable, so it may enjoy a certain level of trust.

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Not everyone needs a Bloomberg. Bloomberg terminals cost around $20,000 per year, something Wall Street has long seen as a necessary evil. But maybe no longer. “For some big banks, it’s an incredibly expensive instant messaging device,” an executive at one market infrastructure company told the Financial Times (paywall). “They’re saying, ‘we’re spending $120m a year on Bloomberg. That needs to come down’.”

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Sharing is caring… about costs. Major banks have already made the decision that employees can share a terminal in some cases, and used the savings to buy cheaper plans from Thomson Reuters that can be customized to fit an employee’s role. A commodities trader, the thinking goes, doesn’t need all the same tools a banker advising on tech mergers does. By contrast, Bloomberg terminals are one-size-fits-all; if you buy a terminal, you have to take all the features it offers even if you don’t need them.

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This is already happening; one banker who was not authorized to speak on his bank’s behalf said his team had seen its number of Bloomberg terminals cut down to one, replaced by Thomson Reuters Eikon terminals. The team shares the remaining Bloomberg terminal.

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A stand-alone chat function makes a lot of sense. In an email, Thomson Reuters said it “aims to create the largest financial markets messaging community and remove barriers to cross-market communication.” This means installing the messaging service on as many machines as possible, even ones that don’t even receive data feeds. Therefore, employees across the business could have access to the secure chat feature. If fewer bankers have their own Bloomberg terminals, they will need an alternative chat service to communicate with those colleagues that don’t have them.

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Clearly, this isn’t a transition that will happen overnight. But with cost pressures mounting and reception already warm, Markit and Thomson Reuters seem to have a better shot at taking on Bloomberg than you might think.

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Bloomberg declined to comment.

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JP Morgan fined $920m and admits wrongdoing over ‘London Whale’

US’s biggest bank to pay penalties to US and UK regulators for ‘unsound practices’ relating to $6.2bn losses last year

JP Morgan has agreed to pay about $920m in penalties to US and UK regulators over the “unsafe and unsound practices” that led to its $6.2bn London Whale losses last year.

The US’s biggest bank will pay $300m to the US office of the comptroller of the currency, $200m to Federal Reserve, $200m to the securities and exchange commission (SEC) and £137.6m ($219.74m) to the UK’s financial conduct authority.

JP Morgan admitted wrongdoing as part of the settlement, an unusual step for a finance firm in the crosshairs of multiple legal actions.

“JP Morgan failed to keep watch over its traders as they overvalued a very complex portfolio to hide massive losses,” co-director of the SEC’s division of enforcement, George Canellos, said.

“While grappling with how to fix its internal control breakdowns, JP Morgan’s senior management broke a cardinal rule of corporate governance and deprived its board of critical information it needed to fully assess the company’s problems and determine whether accurate and reliable information was being disclosed to investors and regulators.”

In a statement the OCC blamed “unsafe and unsound practices related to derivatives trading activities conducted on behalf of the bank by the chief investment office (CIO)”, for the fine.

The OCC said its inquiries had found inadequate oversight and governance to protect the bank from material risk, inadequate risk management, inadequate control over pricing of trades, inadequate development and implementation of models used by the bank, and inadequate internal audit processes.

The US authorities are still pursuing JP Morgan. The Justice Department is pursuing criminal charges against some of the bankers responsible for the massive loss. In an indictment unsealed in federal court this week Javier Martin-Artajo, who oversaw trading strategy at the bank’s London office, and Julien Grout, a trader who worked for him, were charged with securities fraud, conspiracy, filing false books and records, wire fraud and making false filings to the SEC.

Grout’s lawyer said this week that his client was being “unjustly played as a pawn in the government’s attempt to settle its highly politicized case against JP Morgan Chase”.

The bank also faces another fine from the commodity futures trading commission which is still investigating whether the bank is guilty of market manipulation.

Jamie Dimon, the bank’s chairman and chief executive, initially dismissed the mounting losses at the bank’s London offices as a “tempest in a teapot”. In a statement Dimon said: “We have accepted responsibility and acknowledged our mistakes from the start, and we have learned from them and worked to fix them. Since these losses occurred, we have made numerous changes that have made us a stronger, smarter, better company.”

This week in a letter to staff he warned: “Unfortunately, we are all well aware of the news around the legal and regulatory issues facing our company, and in the coming weeks and months we need to be braced for more to come.”

The admission of wrongdoing is a major victory for the SEC. US judges in recent years have questioned fines where banks were allowed to neither admit nor deny wrongdoing. Judge Jed Rakoff blocked a 2011 SEC settlement with Citigroup because he said the lack of an admission of wrongdoing made it impossible for him to determine whether the fine was “fair, reasonable, adequate and in the public interest”.

 

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The 3 Ms of Risk Management

The 3 Ms of Risk Management

 

 

 

Recent market event have pointed to increasing volatility. As has happened all too many times in the past, risk management disasters continue to plague the industry and show up on the front page of the newspapers. Given the potential for these disasters to occur, lets discuss some required risk management capabilities.

 

Consider the following scenarios:

 

A major market move occurs. The Chief Risk Officer (“CRO”) of a broker/dealer wants to know right now what effect this has on the firm. Are they better or worse off? What actions should be taken? To determine the best course of action the CRO needs to know real-time what the positions are and the potential P&L effect. The CRO must also be able to perform a risk analysis immediately. As we have seen, inability to do this will consume resources, raise the firm’s risk profile and possibly cause losses as a result of the market move.

 

A major firm announces a significant profit restatement. The CRO of a major retail brokerage wants to know which accounts will be affected the most. The CRO needs to know real-time which accounts have concentrations in that industry and SIC code. Since it isn’t clear yet what the full effect of the restatement will be on security prices, can the CRO perform a what-if analysis on specific accounts to determine the potential effects on the firm and the accounts so that proper actions can be taken? Inability to do this real-time will consume resources and increase the risk profile of the firm and the accounts.

 

In both cases, could the CRO have set up early warnings so that the risk systems would have generated alerts as to problem positions or accounts when specific actions occur so that the CRO can spend less time finding risks and more time managing risks?

 

The industry has spent many dollars effecting comprehensive risk management capabilities. Ultimately risk management is, however, a process that requires tools and the right mindset, not just a system that measures risk. The purpose of risk management is the following: minimize the probability that an error occurs AND that it goes unnoticed. To do that, a firm must have all the components of effective risk management. The firm must have the ability to perform the 3 Ms of Risk Management: Measurement, Monitoring and Management of risk. In this paper, we will outline the basic capabilities of each of the three areas.

 

 

Risk Measurement

 

All firms must have the capability to measure their risks. Most firms have risk measurement systems. However, there is a lot more to it than that. Risk measurement involves ALL aspects of the capability to measure risk, not just having systems. To measure risk effectively and accurately, the firm must have accurate and timely information as to its positions, its counterparties and all relevant information regarding its positions and counterparties. This information should ideally be available on a real-time basis as markets move very rapidly and soon the risk analysis may no longer be valid. Measuring this information solely on an overnight (or end of day) basis will not be sufficient as market conditions change during the day, and customer and counterparty activity changes the firm’s risk profile constantly. It is also not sufficient to simply do this several times a day. As market conditions change, the value of the firm’s and its customers’ positions changes accordingly, either favorably or unfavorably. In addition, as customers do trades during the day the firm must be able to track its customers’ accounts as they transact business. This information must be accurate, accessible in a timely manner and able to be retrieved from the firm’s computers and sent to the relevant analytical models for risk evaluation. During some recent risk events, many firms learned that they could not do this effectively, much to their dismay.

 

So what does effective risk measurement entail? Several key components are required:

 

The risk measurement methodologies used must accurately measure the risks. There are many different ways to measure risks and firms use most of them. The two basic necessities for a risk measurement methodology to be effective are that they must reflect the risks they measure and all relevant parties must understand them.

 

Different kinds of firms will require different kinds of risk measures. The measures needed for a portfolio-based approach to risk measurement are not exactly the ones needed for a retail operation. The portfolio approach requires position, position attribute, counterparty and counterparty attribute data. A retail operation will require all that and extensive information at the account level so it can see what individual accounts are doing real-time.

 

The firm must be able to examine its risks at any level and aggregate up or drill down to any desired degree. For example, a broker dealer must be able to measure risk by security, security type, counterparty and type, industry or SIC classification, currency, geographical location, etc. The B/D should then be able to aggregate up or drill down in any direction (for example by country by currency or vice versa). A retail brokerage should be able to measure risk by account, by account type, by industry, SIC code, etc, and aggregate up. They should also be able to drill down to the account level after starting with a portfolio approach. In addition, a retail brokerage needs to perform sophisticated margin calculations on a wide variety of products. Also, they would need to be alerted when specific activities occur in selected accounts, e.g., large trades or prohibited activities.

 

The firm must be able to perform scenario and what if analysis on a real time basis for any of its risk measurement categories. For a retail operation, this means even at the account level.

 

The analytical models used to measure risk must be accurate and measure the right risks. The models must be appropriate to the business and the products. Different products may require different kinds of models and there is nothing wrong with that. Use as many models as is necessary and no more.

The inputs to the models must be accurate. Many firms have a problem with their data and getting it to the right system at the right time. The data must be accurate, clean, and timely. This applies to model-generated data (including the results of risk analysis) as well as historical market data. Without accurate inputs, the model will give misleading results, leading to inaccurate decision-making.

 

The connections between the systems must be accurate. Feeder systems must feed the inputs to the risk model on a timely and accurate basis, just as the risk system must feed other systems in the same manner.

 

The systems must work automatically. You should not have to do anything extra for the system to be measuring risk accurately and timely.

 

The firm should periodically assess its systems and their ability to perform, effecting updated capabilities when necessary.

 

 

Risk Monitoring

 

For effective risk management to take place, risks must be monitored. A firm that simply measures risk three thousand ways but does not monitor it on a timely basis will likely suffer at some point. Risk monitoring includes all aspects of ensuring that accurate risk measurement information is available to the right people on a timely and accurate basis. What does effective risk monitoring entail? Several key capabilities are required.

 

The firm must have timely and accurate risk information available to the right people at the right time.

The firm must have a set of comprehensive risk reports generated during the day. The reason that a set of reports is necessary is that different levels of management require different levels of risk information. The key criterion is that the reports reflect the degree of granularity and breadth of information required to optimize the decision-making capabilities of the party that gets the reports.

The firm must also have this information available on a real-time basis. This means that it must be available online for the parties that require it so they can see what is going on at all times. The same issues of granularity and breadth apply here.

 

The risk systems should have the capability to alert the proper manager when preset conditions occur so that proactive risk management can occur. The firm should set up a variety (as many as needed) of risk conditions that different managers are concerned with. These conditions should also be set in a variety of ways. The parties could set up criteria that will generate alerts. The relevant manager could then drill down into the alert to investigate further. The proper action could be taken.

For example, a B/D could set these alerts to show limit utilization above a certain level (e.g., 75%) and by security, currency, counterparty, trading ledger, industry or geographic location. The system alerts the appropriate level(s) of management when the condition is met. The alerts should also happen as a result of a what-if or scenario analysis, alerting the appropriate party to what could happen under certain conditions. For example, an alert could occur if a major market move would cause an X% loss in a particular security. Management can then examine the alert and take appropriate action, if any. These alerts are set by management and should reflect the conditions with which management is currently concerned.

For a retail operation, this would include all the above. It would also need to include alerts at the account level such as a big trade or an account that is utilizing an increasing portion of its credit and is heading toward a potential margin call. For example, an alert could occur if an X% market move would cause a margin call in a large (or small) account(s). Management can set up appropriate conditions for accounts it wishes to monitor and be alerted when those conditions are met. Management can then examine further and take the appropriate action, if any.

In addition to all the reports and alerts, managers must effectively communicate with each other so that they are aware of current conditions.

 

 

Risk Management

 

The first two steps in the process provide the analytics and the tools that managers at all levels must have in order to make effective decisions regarding risks. The final step in the process may be the simplest to explain. After all the risks that can be measured are monitored (those that can be measured. Not all risks can be measured and you should not try!), and after the correct monitoring systems and procedures are in place, the final step in the process is actually managing the risk. This simply means management decision-making when called for, based on the information that is available. Managers at every level must be ready to take appropriate actions when a condition exists that warrants attention. This means proactive actions. Remember that not every risk condition or situation requires action. It possible that, for example, that a limit is exceeded on a trading floor and management becomes aware of it. After reviewing the excess, determining the cause and discussing the possible harm, the appropriate managers may let it stand and take no action. Or, an alert can be generated on a specific account. After drill down and review, management decides no action is called for.

 

Some of the critical aspects of managing risk effectively are:

 

The proper analytical tools must be used so that the information to decide possible courses of action is reliable

The proper risk monitoring capabilities, including alerting capabilities that provide this information on a real time basis, must be in place

A risk-oriented mindset must exist in all employees. Senior management must drive this mindset from the top down. Everyone bears some of the responsibility, not just management and risk managers

A willingness to be proactive regarding risk management, treating risk management as a business partner, not simply part of a compliance function

 

Conclusion

 

As we all know, there are many crucial aspects to implementing effective risk management capabilities at a firm. It is critical that each phase be implemented at any firm that wishes to effectively manage its risks. This can be summarized relatively simply. The tools for measuring risk must be accurate as must be the inputs to those tools. This means models must be accurate. Data must be clean. The technology behind the system should help the risk management process by identifying risk so that managers gave increased resources for managing risks. Real-time capability is required; batch processes won’t cut it any more. The outputs of the risk measurement process must be available on a real time basis so that managers understand what is happening as it is happening and can take appropriate action. This means everyone gets the info when they need it. Systems that inform management of current conditions go a long way to helping the process. Finally, everyone should consider risk management as part of his or her job. Effective risk management is possible when these conditions are met.