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Living Up To Expectations: Risk Management Battles To “Earn Its Spurs” In Driving Capital Optimization

Posted: 31 January 2013 | Source: IDC Financial Insights

IDC FINANCIAL INSIGHTS OPINION

Philosophizing about the role of risk management in a financial institution has been all the rage for the past four years. What is the risk function's purpose What value does it add How pervasive is its influence How seriously is it regarded across the rest of the business?

While most industry participants have been in broad agreement on the theoretical responses to these questions, such has been the complexity of the post-crisis operating environment that we have struggled to see any clear consensus emerging in the strategy, practices, or operational behavior of financial institutions. We have seen pockets of improvement take hold across the banking community but scarce sign that those improvements have been institutionalized. Until now, that is.

What the findings of this White Paper indicate is that we are finally seeing a consistent view of risk management at the heart of the business taking hold across the industry. This is not just a case of senior management and the board paying lip service to a more integral risk function, this is operational progress that is giving risk management and the chief risk officer (CRO) the platform to have a defining influence on both strategic and tactical decision making.

However, having been charged with charting a profitable course through what are still choppy economic waters, senior risk executives are nervously reviewing whether or not they are sufficiently equipped to navigate such a perilous environment. At a time when speed and agility are required, the performance of the risk function threatens to be compromised by a cumbersome risk infrastructure legacy.

Make no mistake about it; the eyes of the industry are very much focused on risk management at this moment in time. As constraints on capital grow, expectations as to the value it can deliver have grown enormously. So, having been given control of the steering wheel, now is the time for risk to assert its credibility; to be fatally undermined by a restrictive legacy would set its evolution back years.

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Living Up To Expectations: Risk Management Battles To “Earn Its Spurs” In Driving Capital Optimization

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