Many senior risk executives at leading banks believe that capturing and processing risk information across their enterprises is currently inadequate. And seven in ten financial institutions acknowledged that they are currently reviewing their risk infrastructure to better understand risk information, according to a whitepaper by IDC Financial Insights sponsored by Sybase.

Based on interviews with senior risk executives from tier one and tier two financial institutions, the whitepaper examines the role of the risk function in optimising the effectiveness of capital allocation and consumption at all levels of a financial institution. “While senior risk executives are required to play a more strategic role and drive capital opitmisation in the post-crisis world, they are in danger of being undermined by a restrictive legacy technology that severely impedes the value of risk information. Forward looking firms will invest in risk data infrastructure to ensure that high quality risk data is consistent and available throughout the organisation,” says Stuart Grant, financial services business development manager at Sybase.

According to the whitepaper, eight out of ten view the risk management role as a strategic partner to the board, whilst seven out of ten cited its importance in driving strategy across the business. Once a reactive tool, the risk management paradigm is evolving to take on a decidedly more proactive approach that creates value. The front office faces strict internal mandates to take responsibility for the risk it originates. While a few banks are able to refresh this type of information intra-day, real-time updates delivering value to the business are viewed as a distant prospect. Many institutions are still forced to accept trade-offs between timeliness, reliability and completeness of analysis when it comes down to risk, liquidity and capital information.

“In the coming months and years, risk management has the opportunity to cement its recently attained status as the core of a financial institution. However, this will require material investments of time and money to bring the risk information and analysis capability to a level of implementation commensurate with the demands of today’s world,” Grant comments.

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