LIBOR Transition Risk Management

Meeting the pressures of the LIBOR transition

With the end of the use of the London Interbank Offered Rate (LIBOR) approaching at the end of 2021, institutions are under pressure to implement their LIBOR transition plans, to identify and mitigate commercial, operational, reputational, and regulatory risks.

The transition presents challenges them with challenges – operationally, technically and commercially. While many have well-advanced plans, many also see how the next hurdle will be implementing a technology solution for capturing all their business relationships and contracts in time to ease the transition to a post-LIBOR world.

Leveraging automation to transition to LIBOR

The ubiquity of LIBOR as a measure for trillions of dollars of contracts has underpinned the growth enjoyed by global financial services for over 40 years. Its demise means institutions must capture and store all the contractual and operational elements of the contracts ad relationships. At the same time, they have to prepare for a world where multiple risk-free rate measures may exist side-by-side.

The dynamic nature of financial services means that data related to specific contracts are stored in End User Computing (EUC) applications – typically Excel spreadsheets or Access databases, rather than corporate IT databases. LIBOR transition demands that this data is found and added to a central LIBOR register.

Given the many thousands of spreadsheets, each with thousands of cells, typically used across an institution for a range of key (and non-key) business processes? Identifying LIBOR reference rates and contracts within vast spreadsheet estates in a timely manner is challenging for even the best-organized firms.

Once these LIBOR spreadsheets are identified, having a centralized management framework to manage them will be crucial to maintaining a consistent perspective on the LIBOR spreadsheet estate.

The final element of managing the LIBOR spreadsheet estate?  Monitoring for changes, as contracts are negotiated, retired or created, using revised RFR measures.

Solutions

The transition to LIBOR, as well as dealing with other regulatory matters where EUCs and vital data are involved, demands proven automated solutions like those from Mitratech.