Enterprise risk management leaders gather in Cannes with a new approach to value creation strategies

Toronto/London/Cannes - September 25, 2007 -

World leaders in enterprise risk management are meeting in Cannes over the next two days for the ninth Algorithmics Risk Conference.

Dr Michael Zerbs, President and COO of Algorithmics is presenting a new approach to creating value in financial institutions, focusing beyond the traditional debt-holder centric approach to incorporate equity investors' long term objectives.

Dr Zerbs said, 'Unprecedented innovation in financial products and services, coupled with advances in financial engineering and risk assessment tools, as well as new accounting regulations, are making today's financial markets more 'complete' - that is a broader array of risks and asset classes are more readily quantified, priced and traded.

'This flexibility is enabling financial institutions to unbundle and re-bundle risks proactively across their various businesses to pursue financial opportunities. The implication of unbundling for capital management is that it then involves active management of risk and reward at the enterprise level, rather than passive diversification and hedging whereby risk exposure is a by-product from business lines.

'In the future, we believe that risk management, capital structure management and capital budgeting, if co-ordinated effectively, will provide a framework to decrease total risk while increasing expected future cash flow. That is, the top-down and bottom-up approaches of the different members of the corporate governance team need to be integrated, and the integrated management of risk and return across the whole of an enterprise will become a fundamental source of value creation.'

Dr Mario Onorato, Director of Algorithmics Enterprise Value Based Management, adds, 'For example, one key area of enterprise risk management is to define the right benchmark for the economic capital allocation and value creation decisions. Aiming for the highest possible credit rating is not always a sufficient condition to maximize the value creation of a financial institution. In fact, depending on the portfolio structure of the existing assets and liabilities the marginal cost of maintaining the highest credit rating can be greater than the benefits it provides.

'Similarly, using the risk adjusted return on capital with a single institution-wide hurdle rate, does not always maximise shareholder value, and can lead to substantial resource misallocation.

'Given the inequality between risk capital and equity, using innovative approaches to measure, manage and mitigate risk, return and value in an integrated manner across the whole enterprise, will be a key differentiator in future for firms who aim to drive for growth and market leadership.'

The practical implementation of innovative risk management will be discussed at the conference over the next three days, by experts from business, industry, regulatory and technology fields, who will explore how challenges and opportunities in the marketplace are impacting risk management. Presentations, workshops, roundtables and panel discussions will explore current industry issues and opportunities for future leadership in risk decisions to enhance shareholder value.

Full details can be found in the Editorial 'From Compliance to Value Creation' at https://www.algorithmics.com/EN/publications/advertorials/value_creation.pdf

Notes to Editors:

Algorithmics is the world's leading provider of enterprise risk solutions. Financial organizations from around the world use Algorithmics' software, analytics and advisory services to help them make risk-aware business decisions, maximize shareholder value, and meet regulatory requirements. Supported by a global team of risk experts based in all major financial centers, Algorithmics offers proven, award-winning solutions for market, credit and operational risk, as well as collateral and capital management. Algorithmics is a member of the Fitch Group.

Fitch Group is the parent company of Fitch Ratings, a global rating agency dedicated to providing the world's credit markets with independent and prospective credit opinions, research and data. The Fitch Group also includes Derivative Fitch, an independent provider of a suite of ratings and comprehensive services for the credit derivatives market; Algorithmics, the world's leading provider of enterprise risk solutions; and Fitch Training, which offers high-quality analytical training for financial professionals. The Fitch Group is a majority-owned subsidiary of Fimalac, S.A., headquartered in Paris, France. For additional information, please visit www.fitchratings.com; www.algorithmics.com; www.fitchtraining.com; and www.fimalac.com.

© 2007 Algorithmics Software LLC. All rights reserved. ALGO, ALGORITHMICS, Ai & design, ALGORITHMICS & Ai & design, KNOW YOUR RISK, MARK-TO-FUTURE, RISKWATCH, ALGO RISK SERVICE, ALGO CAPITAL, ALGO COLLATERAL, ALGO CREDIT, ALGO MARKET, ALGO OPVANTAGE, ALGO OPVANTAGE FIRST, ALGO RISK and ALGO SUITE are trademarks of Algorithmics Trademarks LLC.

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