18 December 2017
visit http://response.ncr.com

Risk management weaknesses at finance firms persist - EIU survey

04 May 2010  |  12025 views  |  1 Risk on chalkboard

Many of the flaws in risk management at banks and insurers that precipitated the global financial crisis remain unaddressed even as new dangers have emerged, according to research from the Economist Intelligence Unit.

The report, sponsored by SAS and based on a survey of 346 financial sector risk managers, reveals that most have made significant progress since the crisis to strengthen their risk capabilities.

Discussions about risk have become a key part of the boardroom agenda, chief risk officers now have a prominent seat at the top table and there is renewed zeal for instilling a greater awareness of principles in the front office, the so-called first line of defence.

However, inadequacies in expertise, data quality and processes remain a worry. The enthusiasm for a large-scale overhaul of risk management has created personnel shortages as firms and regulators scramble to acquire suitable expertise.

Around 40% of respondents says they do not conduct regular updates or have a clear risk strategy in place. Meanwhile, less than one-half of respondents are confident that they understand the interaction of risks across business lines, and poor communication between departments is seen as a key barrier to effective risk management.

In addition, the focus on regulatory compliance could distract attention from emerging risks, says the report. Respondents to the survey highlight uncertainty over future regulation as the main barrier to effective risk management. There is a danger that the focus on compliance could be crowding out day-to-day risk management.

Risk managers recognise that data quality and availability need to improve but collecting, storing and aggregating data is an area of weakness for many firms, with only 39% of respondents believing that they are effective at these activities.

Abhik Sen, report editor, says: "When it comes to managing risk, banks and insurers are clearly keen to raise their game. But the research shows that improvements have not yet gone far enough to reassure everyone about their capacity to protect themselves and others from a catastrophe like the financial crisis."

The global recession appears to have sparked a spending splurge, with the top 100 financial institutions set to spend over $100 billion a year implementing risk governance frameworks by 2012 - more than double the 2006 figure - according to recent research from business advisory firm Deloitte.

Comments: (1)

A Finextra member
A Finextra member | 05 May, 2010, 10:24

Maybe we should take comfort from the fact that the oil exploration and air traffic control industries don't seem to be too good at asking the big "and what if?" questions either.

I fear that the professionalisation of risk management in all industries has delegated responsibility for and knowledge of it away from experienced senior managers who should be able to take a global view of the possibility and impact of events and given it to specialists who focus narrowly on the statistical likelihood and weighting of events that they can easily measure.

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

Finance firms to spend bilions on risk management - survey

Finance firms to spend bilions on risk management - survey

08 February 2010  |  14696 views  |  0 comments
Regulators call for substantial IT investment to combat risk deficiencies

Regulators call for substantial IT investment to combat risk deficiencies

22 October 2009  |  8349 views  |  0 comments
Risk management top of mind for payments professionals - KPMG

Risk management top of mind for payments professionals - KPMG

24 September 2009  |  7490 views  |  0 comments
Data quality key to risk overhaul - survey

Data quality key to risk overhaul - survey

06 May 2009  |  8194 views  |  1 comments
Risk management overhaul tops bank agendas for 2009 - KPMG

Risk management overhaul tops bank agendas for 2009 - KPMG

06 January 2009  |  12083 views  |  3 comments
Crisis exposes banks' weak risk management practices - Ernst & Young

Crisis exposes banks' weak risk management practices - Ernst & Young

18 December 2008  |  12540 views  |  2 comments

Related company news

 

Related blogs

Create a blog about this story (membership required)
visit www.response.ncr.comvisit www.niceactimize.comvisit www.aciworldwide.com

Top topics

Most viewed Most shared
satelliteRipple completes XRP Lockup
11161 views comments | 3 tweets | 2 linkedin
Banks tap Ethereum smart contracts for MiFID II complianceBanks tap Ethereum smart contracts for MiF...
9825 views comments | 20 tweets | 21 linkedin
Banks and fintech startups join forces on blockchain-based supply chain pilotBanks and fintech startups join forces on...
7704 views comments | 19 tweets | 22 linkedin
Nordea takes Open APIs into live productionNordea takes Open APIs into live productio...
7306 views comments | 6 tweets | 26 linkedin
Digital banking startup Loot secures £2.2 million seed roundDigital banking startup Loot secures £...
7252 views comments | 5 tweets | 11 linkedin

Featured job

Find your next job