Risk technology: spend your budget on the carrots, don’t waste it on the stick
Anthony Pereira, CEO of Percentile, specialists in risk technology for financial services, examines the Basel III interim findings which see the industry falling short
The financial crisis exposed a number of weaknesses in the financial industry’s ability to assess, realise and mitigate risk on a very public scale. The knock-on effect of this exposure has been, and continues to be, vast with financial institutions being subject to heavy scrutiny from regulators. The expectation on banks to demonstrate increased transparency and the ability to effectively manage their risk has intensified substantially. Continued dissatisfaction with banks’ abilities to disclose information has led regulators to step in to create a global, overarching risk-data aggregation and risk reporting framework with a clear objective to strengthen banks’ risk management capabilities and practices. With implementation deadlines looming in January 2016, the onus is firmly on banks to comply against a very short timetable.
This raises a key question: will banks comply purely because they have to, or because it makes sense to? For some, compliance may be regarded as a box-ticking exercise, sufficient to get through the stress-testing requirements. For others, an appreciation of the business insights and competitive advantages – not to mention better use of risk capital – that smart risk technology offers, is giving pause for thought.
In a climate where trust in the banking sector is low and capital is scarce, is investment in risk technology simply a result of regulatory pressure, in which case banks are reacting to the presence of a stick, or considered as crucial for the better running and understanding of a business – which, as a planned by-product, adheres to regulatory requirements?
To continue reading this article, please complete the contact details form.