Funny reading about CEP and risk analysis

Marc recently wrote a post about how Complex Event Processing (CEP) products are software tools and not a solution to the problem of risk in the capital markets. Although his post was written out of frustration, I found myself laughing (not at Marc, at the content that he analyzes). But I find humor in strange places.

For example, looking at the premise for the article that Marc criticizes:

New complex event processing applications promise to help firms get a better handle on their risk exposure, but can CEP erase Wall Street’s risk management woes?

That question is funny to me because I imagine replacing the three pages of text that follow with the real answer:

No, and that’s a silly question.

This kind of thing doesn’t frustrate me so much because anyone involved in risk management already knows how absurd that question is. If there are executives out there who even consider that software and not strategy is the solution to their RM, they are probably beyond help and should just throw a few bushels of cash on a fire. Same result, much less effort, and at least you could toast some marshmallows.

I suspect that the only people who would take this article seriously would not know risk management if it were standing under a huge, neon “this is risk management” sign. I guess my point is that I’m not very worried about anyone with any influence taking the article seriously. And I hope I’m right about that.

I really do wish that we could get better articles about CEP, though.

If someone were looking to write a real article about risk and CEP, here is a suggestion for the main points:

1. Risk management has many components and some people feel that risk metrics that are updated in real-time will be an important component. Under this heading, we could identify exactly who feels this way, other than CEP vendors.
2. Firms looking to develop real-time risk metrics capability increasingly turn to CEP products to ease the burden of building and maintaining the software. Here we could get some quotes and metrics about how much CEP products can help build real-time software.
3. However, CEP products are software tools that don’t come prebuilt in with risk algorithms. Some vendors provide prebuilt risk products on top of CEP products (list of these vendors goes here). But using a CEP product will, by and large, mean incorporating your own risk algorithms, so make sure that the product can handle them. In any case, the place to start will be with continuously assessing the RM strategy and needs, and if a real-time component is needed then an evaluation of the capabilities of various CEP products and/or prebuilt risk management solutions.

And the caption for the article can be something like:

Will firms adopt real-time metrics as part of their risk management strategy? And how can CEP products help?