Accelerating risk modernization for regulated financial systems
Discover how Slalom and Snowflake helped a large financial institution respond to regulatory changes and better serve its clients
For financial institutions that handle trillions of dollars in transactions annually, effective liquidity management is critical. For systemically important financial market utilities (SIMFUs) in particular, a failure or disruption in their liquidity poses an existential threat not just to the institution itself, but to the entire US financial system. However, many SIMFUs are constrained by legacy technology platforms that impede their ability to understand and manage liquidity risk effectively. Embracing modern risk management systems empowers financial institutions to operate more efficiently, proactively mitigate risks, and bolster their overall resilience in an ever-evolving financial landscape.
Effective risk management: Roadblocks and opportunities
A major challenge for financial institutions lies in aggregating and integrating data from various sources such as trading platforms, clearinghouses, and market participants. Each source may use different data formats, standards, and frequencies, leading to inconsistencies and inaccuracies in the consolidated data view. This hinders a SIMFU’s ability to gain a comprehensive understanding of their liquidity risk exposure.
Additionally, SIMFUs operate in a highly dynamic financial market environment where liquidity conditions can change rapidly, and volatility can spike unexpectedly. In such scenarios, they need to adapt their operational processes quickly to respond effectively. However, their legacy platforms, often monolithic with tightly coupled components and technical debt, lack the agility to introduce new processes or update existing ones promptly. Outdated architectures, limited automation, and rigid workflows further exacerbate this challenge.
The prolonged “time to market” for operational processes during periods of market volatility or urgent situations can lead to missed opportunities, increased risk exposure, and potential financial losses. Regulatory authorities closely scrutinize SIMFUs’ ability to respond promptly, adding further pressure. Navigating the vast amounts of complex operational data to extract meaningful insights requires sophisticated analytical tools and expertise.
While regulatory pressures intensify the need for SIMFUs and their partners to adopt advanced technologies, transitioning to modern systems also unlocks significant business value. By leveraging cutting-edge data analytics, institutions can streamline liquidity risk analysis and decision-making processes, reducing turnaround times while maintaining high accuracy. This efficiency not only enhances risk management practices but also enables swifter responses to market fluctuations and evolving regulatory demands.
A modernized platform further enhances exploratory data analysis and rapid development of new risk tools, driving innovation and agility within risk operations. This accelerated innovation cycle equips institutions with the ability to adapt promptly to emerging risks and capitalize on new opportunities. Critically, increased access to liquidity risk data and self-reporting capabilities empowers both members and regulators with greater transparency. Such openness not only strengthens compliance but also cultivates trust and credibility among stakeholders.
Ushering in a new era with Slalom and Snowflake
Navigating the complexities of modernizing risk systems is a daunting task that many SIMFUs are grappling with today. Many of these firms are already bringing risk assessment data to Snowflake’s platform. However, a sizable number have yet to move processing and visualization capabilities for this data closer to where it resides. With Snowflake now offering integrated compute and visualization tools in addition to storage, the next logical step is to leverage these capabilities to make full use of the risk data on the platform.
Slalom has been supporting one such financial institution on this journey since 2017, establishing itself as a trusted partner for their modernization efforts. In this case, the client was managing liquidity risk on legacy technology platforms that could no longer meet their evolving needs and the increasingly stringent regulatory requirements.
The client sought to achieve the following key results through their liquidity risk modernization initiative:
- Increased use of the public cloud for the modernization journey
- Consolidated client-facing user interfaces
- Streamlined data and data governance
- More time for their liquidity risk team to focus on analytical, ad hoc work such as regulatory responsiveness
Recognizing Slalom’s expertise with the Snowflake AI Data Cloud platform and our established partnership, the client engaged Slalom to help define the strategy and roadmap for their liquidity risk modernization journey.
Slalom faced the task of preparing the client to move to the cloud in an extremely risk-averse and highly regulated environment. In just four months, we needed to align on a vision, develop a strategic roadmap, demonstrate technical viability, and gain organizational support.
Our team’s goals were (1) to make the liquidity risk process better for the client, (2) to better serve the needs of the financial institutions they serve (our customer’s customers), and (3) to lay the foundations for a more effective response to regulatory changes in the future.
Cloud strategy and roadmap in a highly regulated space
The transition to cloud-based platforms and the integration of advanced data analytics are foundational to achieving a more agile and responsive risk management framework. Leveraging cloud technologies not only enhances operational efficiency but also facilitates a more dynamic analysis of risk data, enabling real-time decision-making and regulatory reporting.
To lay the groundwork for a more agile and responsive risk management framework, we adopted a strategic approach by leveraging the combined strengths of Snowflake’s AI Data Cloud and Amazon Web Services (AWS). This powerful combination allowed us to establish a robust technical foundation to reduce operational overhead, automate manual processes, and facilitate seamless integration of advanced data analytics capabilities. By harnessing Snowflake’s scalable and governed data platform on AWS, our solution enables real-time analysis of risk data, empowering timely decision-making and efficient regulatory reporting.
Next, we developed an incremental roadmap to address the client’s pain points and phase out their legacy system efficiently. The solution leverages several key Snowflake technologies for comprehensive data management. Snowpark enables analysts to perform computations directly in Snowflake using familiar languages like Python, Java, and Scala, streamlining risk-processing workflows. Snowflake Horizon provides out-of-the-box data quality measurement and reporting, crucial for maintaining reliable data-driven systems. Additionally, Snowpark Container Services allows for a customized, intuitive user experience closer to the data, operating within the customer’s governance boundary without additional infrastructure setup. This approach eliminates traditional ETL processes, reduces data movement, ensures data quality, and enhances user experience — all while maintaining robust governance and security.
In parallel with the delivery, Slalom helped maintain executive leadership alignment. We helped ensure better coordination and communication between technology teams and the business through regular steering committee meetings and other collaborative efforts. Working with leaders and on-the-ground resources during the strategy and implementation phases ensures we’re operating as one team, consistently returning to the original intent and the problems we’re trying to solve.
Throughout this phase of the risk modernization journey, we had to navigate the complexities inherent to a highly regulated financial institution. Our engagement with this client was built on strong, trusting relationships, as their work affects not just their customers or governing bodies but the entire US financial system. To ensure seamless collaboration and transparency across a large communication network, we facilitated regular meetings that brought together key stakeholders from our team, the client’s team, Snowflake, and AWS. These cross-functional discussions enabled open dialogue, alignment on objectives, and a shared understanding of the critical nature of this undertaking.
For a high-risk industry, higher rewards
At the end of four months, IT and the business were aligned on a multiyear roadmap and an execution plan for the next four months. Approvals were cleared, and we gained buy-in from the business, technology teams, and enterprise to proceed with implementation.
The collaboration and co-creation across multiple partners, as well as global and local teams, in a complex and high-stakes environment was a success, which we attribute to our focus on trust and relationship-building at the center of everything we do. As we embark on the accelerated execution, the next phase of this multistep project, we plan to leverage the foundational building blocks established by the team to modernize other systems in the risk portfolio. Moreover, these modern risk applications built on Snowflake can be shared inside or outside the organization, meaning regulatory requests may someday soon be completed through self-service dashboards rather than ad hoc analyses or static emails.
Beyond the project: A model for industry-wide modernization
Organizations across the finance industry struggle with legacy risk systems that are unable to adapt quickly enough to handle the growing volume and complexity of regulatory demands, hindering their ability to provide timely and comprehensive responses to regulators. The success of this project from strategy to mobilization and execution serves as a blueprint for other financial institutions facing similar modernization challenges.
Slalom’s experience and methodologies from this endeavor have been distilled into an accelerator, enabling other clients to navigate their risk modernization journeys more efficiently. This approach not only addresses the immediate needs of individual clients but also contributes to the broader goal of enhancing the resilience and agility of the financial services industry.
By adopting this accelerator, financial institutions can benefit from a modern, cloud-based risk management platform that leverages the power of Snowflake’s AI Data Cloud. This accelerates time to insight, improves decision-making, fosters innovation, and enhances regulatory compliance — essential capabilities for managing liquidity risk in today’s dynamic financial landscape.
Slalom is a next-generation professional services company creating value at the intersection of business, technology, and humanity. Learn more about how Slalom and Snowflake are partnering to help customers leverage the AI Data Cloud and reach out today.
