On Oct. 22, we hosted the MSCI Analytics Summit in London, bringing senior industry experts together to explore the evolving landscape of risk management — what we’ve taken to calling the “future of risk.” The event aimed to address the complex challenges and opportunities in the market, emphasizing the importance of integrating a risk culture within investment teams. The focus was on moving beyond compliance to foster a value-added advisory environment that enhances decision-making and portfolio resilience.
“The way risk management has been done up until now is numbers. It's quantitative. We’re moving toward using data and risk models to develop data-driven narratives. By doing that, risk managers will have a seat at the table to be a part of the dialogue, marrying the qualitative with the quantitative.”
– Rick Bookstaber, MSCI’s director of risk research
Evolving role of risk management
The summit highlighted the significant evolution of risk management, emphasizing the multidimensional influence of risk in all areas of investment management. The panelists discussed how risk management has grown to cover a broader range of areas, including geopolitical risk, regulatory compliance and market risk. Geopolitical risk and conflict emerged as the topmost concern on the minds of clients today.
The role of the risk team is evolving from simply producing reports and analyses to becoming a value-added business partner who collaborates with the front office to enhance decision-making and portfolio resilience. This shift underscores the need for risk managers to build credibility through accurate data, actionable insights and effective communication.
Taking a multidimensional view of risk
Technological transformation
The role of technology in risk management is aiding this shift, with a transformation driven by big data, advanced analytics and AI, which allows for more integrated and strategic risk assessments. Speakers highlighted how the risk function has evolved to needing advanced analytics to incorporate more information than ever, enabling more comprehensive risk assessments. They emphasized the importance of data consolidation and efficiency, noting that the ability to rely on a single source of truth improves accuracy and operational effectiveness. Cloud technology plays a crucial role in simplifying data infrastructure and managing data supply chains. Additionally, AI and machine learning offer transformative potential in risk management by enhancing data cataloging, classification and mapping, while also presenting opportunities to ensure data quality and regulatory compliance. The panelists also emphasized that AI-driven improvements in risk management and data can in turn help institutions synthesize data in mere seconds and give the investment decision-makers much faster, actionable insights.
Scenario analysis
Scenario analysis
Panelists at the conference also spoke about the fact that analyzing macro scenarios is becoming a vital tool for understanding potential risks. The use of dynamic scenarios helps capture the evolving nature of risks and market conditions, providing a more comprehensive risk assessment. The panelists discussed the importance of leveraging dynamic scenarios and stress testing to anticipate and navigate market complexities. They emphasized that scenario analysis allows risk managers to explore a range of possible outcomes and their implications for financial markets, helping to identify potential vulnerabilities and opportunities. This approach is considered particularly useful for managing risks in private assets, where market dynamics and transparency differ significantly from public assets. By incorporating scenario analysis into their risk-management processes, investment teams can better prepare for and respond to unexpected events, ultimately enhancing their efforts toward portfolio resilience.
Using scenario analysis to enhance portfolio resilience
As thought leaders and other attendees from across financial services clearly illustrated at the MSCI Analytics Summit, by fostering a culture of integrating risk management at the core of the investment process and leveraging data-driven insights, investment teams can better navigate market complexities as they work to build more-resilient portfolios.