Risk and Finance integration: reach above the data silos

Over the last five years, firms, regulators and shareholders alike have begun to realise the value of data as a necessary means for growth and survival, but also as a clear and present threat to the success of an organisation.  During times of volatility, a firm’s ability to understand its position and make consistent, accurate decisions on mission critical data is a precious commodity.

Over the last 20 years as firms have become more digitised, technology siloes have developed under the business siloes resulting in an inefficient landscape for the dissemination and analysis of data from front office line of business systems through to middle office and Group level functions.  The result is duplicated data being pushed closer to the end user in an effort to support day-to-day decision making.

Firms developed this way because technology was unable to support multiple user communities in different functional areas of the business with a single platform, or version of the truth.  Now, cultural, regulatory and market structure changes are pushing the financial services organisations toward on-demand analysis of information that is timely, consistent and more importantly actionable.  The historic approach of siloed data supporting business applications is no longer sufficient to provide a firm with the agility to react to regulatory scrutiny and volatile activities that can impact a business intra-day, within minutes or hours, not days as before. Reports from analyst houses such as Celent and IDC highlight the necessity to overcome the complexities of multiple risk systems and data platforms and organise data sources in a way that a frim can have an enterprise-wide, on demand view of risk.

Since the credit crisis in 2007/08, firms have retrenched to understand the short falls and make changes to policy, culture and process to adapt to the new market dynamics.  Now the technology changes are being initiated to fulfil the on-demand approach to a single version of the truth, allowing multiple users to interact with timely and consistent data through their own relevant analysis regardless of functional silo or geographic location.

The heart of this change stems from the Risk and Finance integration programs prevalent across the industry.  It is now understood that the importance of consistency in this environment will drive a firm to succeed or fail accordingly.  However, there are as yet to be realised benefits of this integration to other areas of the business, in particular front office or branch Sales and Trading capabilities.  By having truly integrated, on-demand Risk and Finance analysis firms can improve their more customer centric functions by creating proactive analysis specific to a customer or by using predictive analysis to spot a potential problem before it starts and accurately model it’s likely effects.

These changes are relatively well understood, although the full benefits have yet to be realised.  Many organisations will have embarked on transformation projects somewhere within their firm to various degrees of success.  While firms may have felt like they’ve reached the summit of change needed to meet future market structure and regulatory requirements, the truth is there’s another peak in the clouds.  Only firms with a clear strategy to reach a sound target capability at the enterprise level will succeed, as long as the roadmap is clearly laid out and firms do not deviate from the path.