Tower Group report on Risk Management spending - Comment

A recent TowerGroup report shows that risk management allocation of FSIs' total global IT spending is predicted to rise from 6.5 per cent in 2009 to almost 7 per cent by 2012, pointing towards a better understanding of the critical importance of expert operational and strategic risk management.  

Risk management is a driver for investments but should be dealt with in a close correlation with the banks other top priority for cost efficiency. The question the financial institutions must now ask themselves is if it is possible to achieve their risk management goals with more efficient business processes by streamlining the business processes with IT support for atomisation and control.

In the past, a lack of transparency, lack of ability to document their risk profiles and little data quality made it impossible for even the sound banks to appropriately assess their financial risks. In particular in commercial lending, effective risk management has been an essential factor for some time. Now, banks must begin to look at IT investments in risk management not as isolated expenditure but as a way to find an integrated solution to improve overall business processes.  As poor data quality is a key challenge for effective risk management, it is hardly possible to build a sustainable solution on top of inadequate business processes.  Appropriate risk management systems coupled with an overall, enterprise-wide view within Financial Institutions will support them in regaining confidence in the banking sector moving forward and now is the time to focus on the business case for the risk management investments and making it profitable for the banks and their stakeholder.