When Lehman Brothers went to the wall in September 2008, the industry faced an unprecedented crisis of counterparty risk. How could banks stop ongoing transactions from settling with Lehman when these transactions relied on processes already underway across multiple complex systems within the bank?
Undoing all scheduled/recurrent operations with an important business partner can take a financial institution weeks to complete: it might require the involvement of several business lines and reconfiguration of several front and back-office applications or legacy systems. Some hard-coded historical rules might even have to be undone.
In September 2008, most of Sword FircoSoft's 350 customers using its filtering suite for anti-money laundering compliance purposes found that the software provided the ideal tool for real-time enforcement of up-to-date counterparty risk assessments on a corporate-wide level. It provided the easiest way to block money transfers related to the most current list of risky counterparties.
Because of this, it was a natural move for Sword FircoSoft to extend the reach of its filtering technology to enforce real-time counterparty risk management, while remaining in its domain of expertise. It has now adapted the artificial intelligence techniques in its watch-list software to create Firco Continuity for Liquidity Managers.
Finextra verdict: When they needed to act fast in September 2008, banks found an innovative use for one of the tools in their risk management arsenal. And in counterparty risk management Sword FircoSoft have found another compelling reason for firms to invest in real-time watch-list filtering and alerts management workflow technology.