Survey: Financial IT Wants ‘Integrated’ Risk Management
An enterprise IT survey released this week finds financial firms coping with $500 billion in losses and write-downs looking for a more 'integrated' and balanced approach to risk management. Top 3 drivers: better capital allocation, better loss containment, and even protection against losing trust.
An enterprise IT survey released this week finds financial firms, now coping with $500 billion in losses and write-downs, more willing to adopt a more 'integrated' and balanced approach to credit and market risk. Top 3 benefits: better capital allocation, better loss containment, and even protection against lost trust and a damaged reputation.
The survey also found an increased interest in the enterprise risk management (ERM) class of software solutions to asses and treat risk holistically are in high demand, especially within the troubled financial sector.
The global survey of 316 financial services executives finds more than 70 percent of respondents believe losses stemming from the credit crisis were "largely due" to failures to address risk management issues. The survey also found more than half of respondents (59 %) said the credit crisis is prompted them to "scrutinize their risk management practices in greater detail."
The survey was conducted in July 2008 by the Economist Intelligence Unit on behalf of SAS, a provider of business intelligence (BI) and analytics software.
TowerGroup analyst Rodney Nelsestuen agreed. "Enterprise risk management has taken on new importance as stockholders, boards of directors and regulators demand better, more timely analysis of risk and a deeper understanding of how the institution is impacted by the dynamic risk environment of a global financial community," he said in a statement.
Despite Uptcik in Interest, ERM Won't be a 'No-Brainer'
Survey respondents also anticipate closer scrutiny from regulators. The survey found many institutions are revisiting their risk management practices.
However, the adoption of ERM is not exactly a no-brainer for these firms. Survey respondents also identified several challenges to implementing a comprehensive risk management approach. Topping the list: access to relevant, timely and consistent data and a lack of a corporate culture that values risk management was the most widely encountered challenge.
The survey also found an increasing willingness at financial firms to adopt a more 'integrated' approach between upsides and downsides. In areas such as credit and market risk, an integrated approach can efficiently allocate capital and provide better loss containment; it also serves as a form of protection against a damaged reputation.
"This survey is evidence that the risk management needs of financial institutions are evolving to go beyond regulatory risk and must break down traditional risk silos to drive toward a firm-wide risk view," said Alastair Sim, Global Director for Risk at SAS, in a statement.