According to a new survey conducted by Bloomberg, financial institutions are turning to new technologies to stay competitive amid growing geopolitical tensions and evolving market dynamics. The survey polled over 200 senior industry participants during Bloomberg’s Managing Risk and Valuation six-part event series held throughout North America in the second half of 2024.
Fragmented risk assessments
As markets navigate an increasingly unpredictable global landscape, the survey showed geopolitical risk is a rising priority, with over one third of respondents (34%) deeming it their top concern in the next 1-3 years. Beyond immediate exposures, firms are broadening their attention to encompass secondary impacts, such as supply chain vulnerabilities (19%), while also gearing up to address emerging risks associated with AI and cybersecurity (19%).
While risk teams are keen to manage these complex emerging risks, the survey showed that many firms struggle to confidently assess traditional financial risks. For example, respondents are fairly divided on the current state of market liquidity, with nearly half (43%) saying overall market liquidity has not changed in the past six months, but 18% are stating it is worse and 23% are stating it is better. Similarly, firms are taking divergent approaches to enhance their credit risk frameworks in response to market events of the past few years. Nearly a quarter (26%) are still considering making changes, while another quarter are looking to automate manual tasks (24%), add additional early warning indicators (21%) and conduct scenario analysis (21%).
“Financial institutions face a diverse set of challenges: geopolitical uncertainty, inconsistent liquidity assessments and legacy credit risk frameworks. Like a sophisticated radar system, firms need data and technology that cut through the noise to deliver actionable insights.” said Zane Van Dusen, Bloomberg’s Global Head of Risk & Investment Analytics Products. “That’s why solutions like Bloomberg’s Liquidity Assessment solution (LQA) which uses explainable machine learning models, Default Risk (DRSK), and Market Implied Probability of Default (MIPD) are important tools not just for managing risks, but for driving smarter investment strategies in volatile markets.”
AI in the front office is coming into focus
With an eye toward automation, the survey found that nearly a third (32%) of respondents are utilizing AI in the front office, gaining an edge through automation and faster insights. This shift points to a growing competitive divide, with early adopters poised to capture new efficiencies and advance trading advantages – a reflection of AI’s escalating role in transforming the financial sector.
The survey also highlighted streamlining trading workflows as a priority, with over a third (36%) of respondents selecting better execution as their main reason for using real-time bond pricing, followed by portfolio and ETF trading (26%) and minimizing tracking error (21%).
“The rapid electronification of credit markets and the growing adoption of fixed income ETFs with custom baskets is revolutionizing credit markets. Consequently, the front office increasingly requires real-time pricing to drive credit algos, price and execute basket and portfolio trades, and assess real-time portfolio exposures and risk,” said Eric Isenberg, Bloomberg’s Global Head of Enterprise Data Pricing. “We developed IBVAL Front Office to address this need with pricing nearly every 15 seconds for approximately 45,000 bonds in the USD, GBP, and EUR credit markets.”
Together, these findings underscore a growing need across the industry for real-time data, AI-driven insights, and geopolitical risk management tools. As firms look to streamline workflows and mitigate risks, Bloomberg’s comprehensive suite of solutions are equipping industry participants with the capabilities to stay ahead in an era defined by complex global pressures and fast-moving markets.
To view the full results of the survey, please click here.
