A survey of 19 financial institutions conducted by analyst firm JWG has found that 90% believe improving risk data is a priority for their firm. According to the report, this is not all about compliance with impending new rules stemming from Dodd-Frank, Basel III, et al -- only 32% thought that the need to improve risk information was driven primarily by regulatory compliance. The majority thought that treasury, finance, strategic management and the front-office could all benefit from better risk information.
Separate research JWG has done, based on interviews with more than 120 professionals from more than 45 financial institutions (75% of them U.S.-based), as well as suppliers, supervisors and other industry professionals, has found that "the new, intrusive style of supervision being adopted across the regions hit worst by the crisis, coupled with new penalties for those who do not measure up, will drive firms to develop a new target operating model for risk management."
The analysts say that as regulatory reform continues, it has become clear that regulators are not satisfied with the manner in which firms currently manage their risk. "Furthermore, new remedial tools -- such as greater fines and, crucially, adjustable capital and liquidity buffers -- mean that firms have a real incentive to meet their supervisors' exacting standards," the analysts say.
"The new powers bestowed upon supervisors mean that the business case for improving risk management capabilities is clear," says PJ Di Giammarino, CEO of JWG. "The questions are now 'where to start' and 'how to get the most bang for your buck.' Firms must think beyond their immediate priorities for risk -- staying in business and out of jail -- to determine what their target operating model is for risk management as a whole: what their new 'business as usual' should look like."