Research by 4sight and Rule Financial shows that many financial firms are still to start preparations for collateral management of centrally cleared derivatives.
The paper, ‘Buy Side Collateral Management: Challenges and Opportunities’, was completed by 25 firms across the buy- and sell-sides and asked how prepared they were for the new operational and technological complexity around collateral management of cleared over-the-counter derivatives.
The survey found that only 4 percent of respondents had completed preparations with 46 percent in the process of implementing their target operating model.
Only 27 percent had defined their target operating model but were yet to start implementing it. Out of the respondents, 23 percent had yet to begin defining their target operating model.
Co-author of the paper, Martin Seagroatt, said: “As ever, in solving the collateral conundrum, there is no substitute for mobilising as soon as possible.”
“For those who have yet to decide on a collateral management strategy, the risks are becoming even greater for operating with a substandard, non-optimal system; incurring the high costs associated with non-compliance and inefficient and tactical solutions.”
“Firms that take an active approach and see collateral management as a core competency will outperform those taking a more passive stance.”
