Upgrading Data System Top Priority in Asia/Pacific
By CXOtoday Staff
Mumbai, Feb 5, 2008

Independent research and advisory firm, Financial Insights, an IDC company, has released its annual report identifying the top 10 IT initiatives that will be of strategic importance for risk management in Asia/Pacific during 2008.

The report, entitled "Asia/Pacific Risk 2008 Top 10 Strategic Initiatives: Striking an Optimal Balance between Risk and Reward", incorporates opinions from both their regional analyst teams and industry practitioners, and highlights initiatives that would help financial institutions balance their trajectory of growth with managing the risk profile for 2008.

"In this report, we outline the top 10 risk initiatives, examine their impact on the banking financial services institutions (BFSIs) and technology firms that serve them, and explain why they should be on the minds of chief risk officers at every financial organization across Asia," explains Li-May Chew, CFA and senior research manager for Financial Insights' Asia/Pacific Risk Advisory Service and author of the report.

The initiatives - straddling the entire financial services industry, from banks to insurers to capital market institutions - may not necessarily correlate to those of greatest investment spend, but focusing on these issues will position financial institutions better to incorporate robust risk management frameworks into their businesses.

The first three of these top 10 initiatives, in order of their rank, are:

* Data systems improvements: Risk analysis is highly dependent on data quantity and quality. The spotlight for 2008 continues to be on financial institutions being better data stewards, both in terms of data collation and consolidation. Only with data systems improvement can the mass of pooled data be transformed into constructive information used to identify, evaluate, and manage risk profiles.

Basel II: Are we there yet?: Basel II remains at the forefront of management's agenda as banks progress toward fine-tuning their implementations in preparation for looming datelines of anywhere between 2007-2010 and beyond. Compliance to more sophisticated risk-based capital assessment and pricing award banks with a better developed risk infrastructure, but lack of a solid data foundation remains the principal stumbling block.

Managing operational risk: Banks have recognized that properly managing operational risk goes beyond rubber-stamping Basel-related capital requirements. Efficient operational risk management is fundamental to sound business operations. Organizations continue to focus on managing their operational risk profiles by utilizing applications such as internal loss event databases, key risk indicators (KRIs), and risk assessment mapping. These enable them to increase visibility of operational risk exposures and create early alerts for immediate corrective action.
Source: Financial Insights, 2008

Comments Li-May, "Basel II remains at the forefront as banks progress toward fine-tuning their implementations in preparation for looming datelines. However, lack of a solid data foundation remains the principal stumbling block, which explains why the spotlight for the new year continues to be on financial institutions being better data stewards, both in terms of data collation and consolidation."

Meanwhile, efficient operational risk management is fundamental to sound business operations. Organizations continue to focus on managing their operational risk profiles, with special attention on minimizing business continuity risk and information security incidences, and on scaling up on the prevention and detection of internal fraud.
Looking ahead, Li-May adds, "2008 will also witness financial institutions tackle the more daunting area of holistic enterprise risk, and on looking beyond simply avoiding risk and reducing the organizations' vulnerability to the downside, to focusing on risk taking as a means to generate value."

In their crusade for an intelligent risk management program, Li-May said banks should prioritize key risks and vulnerabilities that need to be addressed, garner top-down sponsorship, integrate their risk framework into the entire business value chain, and invest in cutting-edge robust technology. Meanwhile, key focus areas for vendors would be in generating senior executives' buy-in, partnering to fill functionality gaps, and targeting the lower-hanging clients spurred by compliance datelines.

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