The profitability of investment banks and financial institutions over the coming decade will be influenced heavily by new attitudes towards risk and risk allocation, according to an independent report by the International Securities Market Association (ISMA).
The Risk Revolution and Its Impact on Securities Markets looks at the results in a major survey of ISMA members to ascertain a collective view of the challenges confronting the participants in the next five to ten years.
Report author Andrew Freeman, believes the in-roads being made by insurers into the territory of capital markets could challenge the traditional role of investment banks in the management and distribution of risk.
He also feels that the trend towards risk allocation has suffered a sceptical response from banks , brokers and insurers which customarily performed a pre-determined role in the financial system. Now the barriers between different types of organisation have begun to collapse and paved the way to a greater overlap in their businesses.
In future, he feels that the level of sophistication that insurers are capable of achieving in structuring solutions to risk management requirement is likely to increase. Meaning that the next phase of financial guarantees could see insurers guaranteeing the number of seats sold by an airline or the tons of steel sold by a manufacturer.
