Banorte Digitizes Risk Operations

Banorte, Mexico’s second-largest investment bank, is extending its integration of the Murex MX.3 platform to automate and digitize operations such as counterparty risk, derivatives valuation adjustment (XVA) and collateral management.

Financial market firms often face inefficiencies and operational issues due to legacy-laden, fragmented systems divided across various business lines. Many of the problems have developed due decades’ worth of mergers, acquisitions and a complex variety of proprietary and third-party integrations.

“What you end up with is an architecture which is quite fragmented, meaning there is no consistency of data across different departments and across different business lines,” says Joe Iafigliola, CEO of Murex Americas.

Iafigliola says large firms are struggling to deal with a multitude of complex systems, inhibiting their ability to scale up, evolve and manage risk effectively. Banorte had previously implemented the MX.3 platform to manage some front-office and back-office functions, but the latest integration provides the institution with a single platform to consolidate its front-to-back operations and enable it to manage compliance and risk across its banking, brokerage, pension fund and asset management businesses.

Abraham Izquierdo, risk management executive director at Banorte, says digitizing the management and pricing of counterparty risk is a crucial step in the investment bank’s overall digital program. “Digitizing such activities is key for a successful risk management framework in a bank of systemic importance such as Banorte,” he says. 

The underlying technology provides a central source of data which allows individual teams within Banorte to more easily visualize and understand risk across capital, foreign exchange, derivatives and debt markets—using a ‘single version of the truth.’

“The key aspect is the fact that it is centralized in one environment, in one solution,” explains Murex’s Iafigliola. “There are real reconciliation needs across a firm’s functions—it needs consistency between what the traders see, what the risk managers see, and what the operations team are going to see in terms of margin call processing and other [functions].”

The integration aims to improve the accuracy of risk calculations, monitor exposures and enhance operational efficiency. In addition, the platform will create synergies across the institution’s front-to-back infrastructure, helping it to reduce reconciliation costs and move towards providing real-time data analytics. As part of the functionality, risk checks can be carried out intra-day, end-of-day and in real time, including for credit risk, limits and counterparty risk.

The platform will also enable teams to comply with regulatory requirements for risk management and accounting, mandated under the International Financial Reporting Standards (IFRS).

Banorte’s digital transformation project has been in the works for nearly three years as the bank integrates its front-, middle- and back-office operations into Murex’s single platform. The integration is now in its final phase, with Murex MX.3 expected to go live in June. Banorte is also in talks with Murex about adding other functionalities around credit risk and market risk data.