Why should your company build a strong enterprise risk management culture?

The global financial services industry needs sophisticated enterprise wide risk management solutions to measure and monitor their enterprise risk and to report their exposures. But risk is not something to be avoided, it should be considered something inevitable that comes with a price, in return for some desired reward. The need for effective enterprise risk management has become increasingly important with the emergence of a global financial services industry, increased cross-border trading and a growth in the use of complex financial instruments. The risk management of this global financial services industry has a tendency to be fragmented and inefficient, and many banks are still creating silos despite their growing interest in enterprise risk management. Mounting regulation and the development of new risk management standards, such as the Basel II capital adequacy rules for banks, Sarbanes-Oxley (SOX), Know Your Customer (KYC) - Patriot Act, Solvency II, and Markets in Financial Instruments Directive (MiFID) have accompanied these trends.

What's the definition of Enterprise Risk Management?

Enterprise risk management is a process, effected by an entity's board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risks to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.
Global financial institutions have to seek integrated trade management and risk management solutions as they need to import real-time trade data into the applications they use for enterprise risk management.

French Caldwell, Research VP at Gartner, quotes: "You have to be able to do at least some basic operational risk management in order to prioritize those areas of compliance...that could...introduce significant risk"

The global financial services industry looks for enterprise systems that enables them to manage their credit, market and operational risk on a local and also on an enterprise wide basis that provides a comprehensive range of risk analysis methodologies. They need credit management systems capable of aggregating information to provide a consolidated view of the enterprise's trading and banking books. But they also want the ability to view credit exposure in different ways and to look at the risk for each trade. And because limit management is a key part of credit management, they need limit management capabilities. They look for systems that let them consolidate limit information from across the enterprise but that also allow them to view limits in other ways - by counterparty, country or rating, for example - and that enable traders across the enterprise to send limit enquiries and receive updates in real time. They also want tools that enable them to analyse their market risk, produce consolidated information on their activities across the enterprise, and identify and attribute risk to factors such as interest rates and currencies.
 
The global financial services industry is also finding that technology and business process changes are a growing source of risk exposures, that is called operational risk. Operational risk data show that the second most prominent cause of losses are due to breakdowns in execution, delivery, and process management. Organizations who wish to mitigate these types of risk often use 
  • design review,
  • quality management, or
  • change control processes
to identify potential sources of risk early in the design and implementation process. Quality control is generally less expensive to design into a new process than correcting an error or rebuilding the system after a problem has occurred. While the old saying of total quality control management that quality is free may not literally be true in all cases, most organizations have learned that designing quality into the process not only reduces development and operating costs, it also improves service quality and customer satisfaction. 
 
Risk management focuses on delivering solutions that will enable firms of the global financial service industry to align their IT and business processes to meet risk and compliance requirements, to achieve better operational efficiency, and to improve customer satisfaction. We advice companies to integrate information spread across disparate systems for a holistic view of the company, thus empowering employees to identify and share best risk management and compliance practices.
    • Document management and records retention: - This approach provides version control capabilities, library services, and document level security features that spans the entire document management life cycle and ensure compliance with data storage, retrieval, archival, and disposal requirements.
    • Audit and controls: - We help firms of the global financial service industry to put in place the effective checks and balances required to support compliance and governance efforts.
    • Risk analytics:- A comprehensive reporting environment along with tools and features for business performance management, forecasting, trend analysis with solutions that are built on data bases using reporting and analysis services.
    • Security and privacy management: - A focus on balancing organizational risks and ever increasing external threats, which also considers regulatory compliance requirements.
    • Business continuity management: - An approach to put in place alternative work practices and workflows, such as remote access technology, collaborative solutions, and segregation of critical workflows, to enable employees to provide basic functions remotely in case of incident or natural disaster.

What are the Benefits?

Solutions based on our approach can help provide your financial institution with the following benefits:

    • Align IT and business processes to help enable simpler, faster, and more cost-effective execution of enterprise risk management and compliance initiatives.
    • Help your people identify, employ, and share best practices for risk management and compliance internally and externally.
    • Connect different systems to help give your employees a holistic approach to achieving effective risk management and compliance.
    • Integrate with legacy systems, enabling you to leverage your existing technology investments.
    • Help ensure corporate rules are followed and help secure systems, documents, and records from unauthorized or unintentional access. Provide records to track who has accessed documents at what time.
    • Simplify document management and help ensure that you comply with requirements on how you store, retrieve, archive, and dispose data.
    • Help support specific regulations including Sarbanes-Oxley (SOX), Know Your Customer (KYC) - Patriot Act, Basel II, Solvency II, and Markets in Financial Instruments Directive (MiFID)
Build a strong enterprise risk management culture that refers to the methods and processes to manage all your company's risks and seize new opportunities related to the achievement of your company's objectives! Enterprise risk management provides a framework for risk management, which involves identifying particular events or circumstances relevant to your organization's objectives, risks and opportunities, assessing them in terms of likelihood and magnitude of impact, determining a response strategy, and monitoring progress. By identifying and proactively addressing risks and opportunities, business enterprises protect and create value for your stakeholders, including owners, employees, customers, regulators, and society as a whole.