This is sent from the Economist Intelligence Unit London press office.
For immediate release: Tuesday, April 14th 2009
A fragmented and incomplete view of risk at banks may result in bigger overall exposures, says Economist Intelligence Unit research The Marine film The Man from Earth dvdrip Rush buy
The inability to aggregate risks quickly and accurately across an entire bank may lead to a higher level of risk at the enterprise level, even as banks strengthen their governance, risk and compliance (GRC) practices within functions and business lines. So suggests Strengthening governance, risk and compliance in the banking industry, an Economist Intelligence Unit research report, sponsored by SAP.
Banks struggle with the difficulty of managing complex financial processes – for instance, tracking a borrower’s credit obligations and changing risk profile – and simultaneously gauging their impact on enterprise risk. Success in process management tends to be sporadic and isolated within specific business lines. Banks also report difficulty managing diverse lines of business and multiple regulatory regimes. However, their greatest concern is the cost of building, connecting and
maintaining the processes needed to accomplish enterprise-wide GRC.
“Using GRC initiatives, some banks have begun to take a more strategic view of financial processes,” says Dan Armstrong, senior editor at the Economist Intelligence Unit. “On the one hand, they embed rules and controls throughout the enterprise to make potential problems more visible. On the other, they push a unified picture of risk to the top. The goal is both to boost efficiency and to provide an accurate and timely view of the entire financial picture at the bank.”
The findings were based on the responses of 71 bank executives who took part in larger financial process automation survey in the fourth quarter of 2008, as well as interviews with executives. Among the results were:
? In addition to yielding an enterprise view of risk, a more rigorous approach to GRC can help bankers comply with internal
incentives for better risk management, stronger capital adequacy requirements from the Bank of International Settlements and local regulators, greater scrutiny from central banks and potential requirements from new regulatory bodies chartered to measure systemic risk across the global financial system.
? Bankers paint a rather negative picture of the financial processes that support GRC. Half say there are too many manual processes in their organisations, 38% say methodologies are inconsistent, and a quarter complain of poor visibility and accountability, overly restrictive controls, and incompatible applications.
? A majority of bankers say that the biggest benefits of automation to support GRC are eliminating errors due to manual processes and enhancing data integrity. Cost reduction was a distant third at 31%, indicating that many banks have progressed beyond efficiency as the primary rationale for automation.
? However, the upfront investment remains a significant barrier: Six in ten bankers cite upfront costs as one of the top two obstacles to the investment, and no other impediment was cited by more than 30% of the respondents. However, only 8% of executives say that processes are already sufficiently fast, accurate and efficient.
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