IBM agreed to acquire risk analytics firm Algorithmics for an estimated $387 million.
Algorithmics is a member of Fitch Group, which is majority owned by Fimalac, a holding company based in Paris, France. Fitch Group owns Fitch Ratings, one of the three Nationally Recognized Statistical Rating Organizations (NRSRO) designated by the U.S. Securities and Exchange Commission in 1975, together with Moody’s and Standard & Poor’s.
Algorithmics risk analytics software, content and advisory services are used by banking, investment and insurance businesses to help assess risk, address regulatory requirements and assist decision-making.
The company has created two private subscription-based databases. AlgoFirst consists of about 9,500 cases of external operational losses due to natural disasters which the firm researches from news reports and regulatory agencies. The database includes a brief summary of why the error occurred and the financial loss involved
AlgoOps provides nearly 12,000 cases of operational losses related to employee errors and the financial losses involved along with scaling factors which can be used by operational risk experts to adjust the losses to accommodate their internal statistical models.
This acquisition expands IBM’s business analytics capabilities in the financial services industry. The company said the move will help its 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.
Algorithmics has more than 350 clients, including 25 of the top 30 banks and more than two-thirds of the CRO Forum of leading insurers. These include The Allianz Group, BlueCrest, HSBC, Nedbank, Nomura, Societe Generale, and Scotia Capital.
"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,” said Rob Ashe, IBM General Manager, Business Analytics.
Algorithmics risk advisers will work with consultants in IBM’s Business Analytics and Optimization practice. The Business Analytics and Optimization unit has more than 8,000 consultants including 200 mathematicians with more than 500 patents.
Algorithmics is incorporated in Delaware as Fitch Risk Management.