IBM Eyes Algorithmics for Financial Risk Analytics

One day after agreeing to purchase i2, IBM signs an agreement to acquire Algorithmics, a risk analytics firm focused on the financial sector.

IBM has announced a definitive agreement to acquire Algorithmics, a financial risk analytics firm, for $387 million.

IBM's move to acquire Algorithmics comes one day after IBM signed an agreement to acquire i2, a provider of intelligence analytics. For its part, Algorithmics is a risk analytics firm with operations in Toronto. Algorithmics' risk analytics software, and content and advisory services are used by banking, investment and insurance businesses to help assess risk, address regulatory requirements and make more insightful business decisions. The company's offerings fit well with those of i2, IBM officials said. Algorithmics is a member of Fitch Group, which is majority-owned by Fimalac, a holding company based in Paris.

This acquisition expands IBM's business analytics capabilities in the financial services industry by helping clients quantify, manage and optimize their risk exposure across a range of financial risk domains, including market, liquidity, credit, operational and insurance, as well as economic and regulatory capital, IBM said.

According to a recent IBM Institute of Business Value survey of 1,900 global CFOs, nearly half indicated that their finance organizations are not effective in the areas of strategy, information integration, risk and opportunity management. The roles of financial officers across all industries are evolving-drawing them into more frequent boardroom conversations about forecasts, profitability and exposure to risks. The survey reveals that the importance of integrating information has more than doubled, mirroring the exponential rise in information volume and velocity within businesses today. Financial officers are becoming more involved in mitigating corporate risk in all its many forms-whether strategic, operational, legal or environmental, IBM said.

With the combination of IBM and Algorithmics analytics, companies can measure and assess operational risk associated with lending processes, and market and credit risk exposures. Having this type of transparency and granular insight of financial risk in advance can help organizations meet new regulatory requirements.

More than 350 clients, including 25 of the top 30 banks and more than two-thirds of the Chief Risk Officer Forum (CRO Forum) of leading insurers, use Algorithmics analytics software and advisory services, IBM officials said. Clients include The Allianz Group, BlueCrest, HSBC, Nedbank, Nomura, Societe Generale and Scotia Capital.

"Today's economic environment demands that financial institutions have more cash on hand, a better understanding of their financial standing and the ability to deliver more transparency to stakeholders," said Rob Ashe, IBM's general manager for Business Analytics, in a statement. "Combining Algorithmics' expertise with IBM's deep analytics portfolio will allow clients to take a more holistic approach to managing risk and responding to economic change across their enterprises." 

IBM's agreement with Algorithmics reinforces the fact that companies are looking to reduce independent silos to gain an enterprisewide view of risks for strategic planning, operations and new growth opportunities, the company said.

"It is increasingly important to deliver integrated solutions that provide a deep understanding of risk and enable effective decision support at the same time as meeting rapidly evolving regulatory requirements," said Michael Zerbs, president and chief operating officer at Algorithmics, in a statement. "The need to have the right information at the right time is fundamental to developing and managing business strategies. Combining Algorithmics' thought leadership, technology, content and services with IBM's globally recognized analytics business will help a broader group of clients improve their business performance based on a deeper understanding of risk."

Algorithmics' risk analytics software and services combined with IBM's acquisition of OpenPages and recent investments in predictive analytics will provide clients with a broad range of business analytics solutions, IBM said. Algorithmics' risk advisers will enhance IBM's Business Analytics and Optimization practice. The Business Analytics and Optimization team has more than 8,000 consultants, including 200 mathematicians with more than 500 patents, and a network of analytics solution centers, backed by an overall investment of more than $14 billion in acquisitions in the last five years. Algorithmics' focus on credit, market and liquidity risk, as well as key customers in operational risk, will strengthen and expand IBM's risk consulting services.

The acquisition is subject to applicable regulatory clearances and other customary closing conditions. With the closing of this acquisition, approximately 900 Algorithmics employees will join IBM's Software Group, the company said.