HSBC has announced the launch of its new scenario risk tool on Google Cloud.

The HSBC Risk Advisory tool aims to help manage credit risk more efficiently across its trading portfolio.

Using Google Cloud technology, the tool enables the bank’s traders and risk managers to run multiple “what if” scenarios simultaneously to identify capital requirements necessary to cover potential rating downgrades and default risk of credit products, such as corporate bonds.

“The computing power of Google Cloud makes it much quicker to run complex simulations for many different what-if scenarios, providing a more holistic risk picture of trading for optimum decision-making,” said Ajay Yadav, global head of fixed income and digital strategy for traded risk, HSBC. “HSBC’s digital development team built this innovative capability in less than five months in collaboration with Google Cloud.”

Yadav added: “The focus now is to take the HSBC Risk Advisory tool and integrate climate risk into it as a proof of concept, which we are aiming to make available in the next few months.”

HSBC’s market risk digital development team is now looking to include the impact of climate risk on the trading book. This would take into account the rating agencies’ ESG scores to assess where trading portfolios may be more susceptible to climate change risk.

Adrian Poole, director, financial services, UKI, Google Cloud, said: “It’s exciting to see how financial services organisations like HSBC are embracing cloud technologies and building powerful solutions to empower faster and more informed decision-making, including for climate change-related risks."

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