Risky Business

A group of leading Hong Kong academics has got together to set up a new risk management advisory service called Emerging Markets Risk Advisory. The aim of the company will be to provide local banks, securities houses and finance firms with advice on methods for accessing and using data to perform risk analysis and management.

The company was officially launched yesterday.

The firm's managing director is Dr Maurice Ewing, who most recently was a professor at the Hong Kong University of Science and Technology (HKUST) where he developed and taught executive finance courses in the MBA programme. He has also worked as a quantitative credit risk modeller at the Federal Reserve Board of the US and the New York Federal Reserve.

Ewing is joined by two academics with skills in training and systems. Dr Christopher Westland is the author of ValuaingTechnology and is an expert in financial dynamics. He is also a lecturer at the HKUST.

Galina Nikolaivna Privalova is a training specialist with experience of developing in house training courses for banks in Hong Kong and Asia.

According to Ewing, EMRA will particularly be looking to help smaller local banks with their preparations for Basel II. The greatest problems facing local banks as they get ready for compliance with the code in 2007 or 2008 is the availability of data from which to make their risk management assumptions.

According to Ewing, his firm has developed statistical guides and techniques, which will help these banks mine their existing sources of data and then analyse them to get the right results. In particular, the firm hopes to help banks develop their own internal ratings based system of credit risk management.

EMRA will also help its clients choose between the myriad software vendors who claim to be able to help banks analyse their market risks. Ewing also says that his firm is working on new techniques to help banks manage their operational risks, one of the more controversial aspects of the New Basel Capital Accords.

While the new firm is based in Hong Kong and is initially looking to focus on greater China, it does have regional and global ambitions. Most risk management firms have their provenance from the first world and as such their methods, techniques and skills can be useless in the developing and emerging world.

Ewing believes that having professionals whose understanding is the emerging world, means they will be able to better help emerging market banks grapple with the unique risks they face.