Thomson Reuters has extended its Entity Risk data solution with a Countries of Risks strand that uses an algorithm developed by StarMine, the company’s entity and fundamentals data, and GDP data from the International Monetary Fund to measure the exposure of a firm to multiple countries.
The data service is available immediately as part of Entity Risk, which is delivered through Thomson Reuters’ Datascope delivery platform, and is expected to find favour among buy-side firms, hedge fund administrators and global custodians seeking to better identify and manage portfolio risk and regulatory reporting.
StarMine, a quant trading specialist that was acquired by Thomson Reuters in 2008, has used its experience in developing predictive models for investing to create the Countries of Risks model that incorporates fundamental and economic data on issuers.
Tim Lind, global head of middle office at Thomson Reuters, explains: “When we look at risk and reporting, we see four buckets of exposure – market counterparty or issuer, asset class, industry sector, and country or market. Countries of Risks completes the spectrum of measuring and reporting risk.”
Lind notes that Countries of Risks is a logical addition to entity records and says that while issuer domicile is already described, the solution’s additional data qualifies economic issues such as where the issuer generates revenue, where headquarters is based and the base currency of disclosures. He says: “The buy side usually looks for a single answer to the question of country of risk, but this will change and become more granular. For example, the StarMine algorithm can calculate an issuer’s percentage of exposure to different countries.”
Going forward, Thomson Reuters intends to enhance the Countries of Risks solution with further data that links issuers to countries. Lind suggests supply chain information could be included, detailing not only where an issuer sells products, but also where it sources components for its products, although he warns that data availability could be a challenge.