Technology for measuring risk adjusted bonuses coming your way
It was only a matter of time before someone tried to popularize a technology for reducing bonuses according to the risk associated with profit generation.
It's happened. Software company SAS and market mapping specialists Coalition have launched something called Rapid Risk Profiling which purports to correlate risk and reward at financial services firms on an individual basis.
The system is so brand new that it's yet to actually be sold to any banks. When it is, Coalition CIO Ben Schoff says it will have the most noticeable impact on pay for traders, whose pay would henceforth be based on risk adjusted returns to capital.
Scoff says other financial services employees may also suffer be affected.
"We intend to push this into other areas, like operational risk," he tells us. "We're mapping the market to get a better understanding of the correlations between risk and certain activities so that banks can establish how risky something is."
Schoff says M&A bankers will be least impacted as they're just giving advice, not risking capital (unless, of course, they're at Citigroup, HSBC, or JPMorgan - historically).
