Labelled the world’s most important number upon which trillions of dollars are resting in millions of financial contracts, clients are using our technology to support their LIBOR transition programmes to RFRs (RiskFree Rates).

With so many contracts impacted, it’s simply not feasible for any large business to perform a manual review exercise and the transition is not as simple as ‘find and replace’. Contracting parties need to understand current payment term mechanisms, hedging obligations, the parties responsible and any termination rights etc.

Here are some of the challenges facing businesses.

Key challenges 

  • The quality of historic record keeping will vary based on the underlying asset class. Due to various regulatory reforms, products such as derivatives would generally have good quality metadata, however, other asset classes such as Loans will require a considerable effort to load the “machine” with useful data.
  • Due to the fragmented phase out approach across different LIBOR currencies, determining the prioritisation of which contracts need review, and more importantly – which data is required, can be a big challenge and often requires a contract to be reviewed multiple times.
  • The volume and range of documents will mean that technology has to be agile and scalable for the ‘back book’ project but also suitable for BAU & the ‘forward book’.
  • Understanding your role in the contract – are you a “receiver” of a rate or do you have influence in amending the contract?
  • The complexity of the data model that needs to be fulfilled to allow for an easier remediation strategy without further need of more contract analysis.
  • Understanding the context of the LIBOR reference beyond a simple “LIBOR” search (e.g. is it referenced as an Interest payment).
  • Understanding the relationship between contracts where products are hedged.

Contact us to find out how we are addressing these challenges.