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Banks Are Driving ERM Programs, But Believe Their Risk Technology Needs Work

A Deloitte survey shows that an impressive 86% of banks have chief risk officers and 79% have an enterprise risk management program in place or in progress. But the numbers of those happy with their current risk technology are much lower.

In a survey of 131 financial institutions around the world, conducted in the third quarter of 2010, Deloitte has found clear evidence that banks are working hard to beef up their risk IT infrastructures.

This is good news for chief risk officers, whose ranks are growing. According to the survey, 86% of banks have a CRO or equivalent position, up from 73% in 2008 and 65% in 2002. And it's not just an empty title. At 85% of these institutions, the CRO reports to the board of directors or to the CEO or both. Risk is being taken into consideration in performance evaluations and compensation decisions at 37% of the banks surveyed. This is bound to increase this year, at least in the U.S., because Dodd-Frank asks regulators to require large banks to take risk into account in their compensation packages.

Most -- 79% -- of banks surveyed have an enterprise risk management program in place or in progress, an increase from 59% in 2008. One-quarter of the bankers, though, said that data integration was extremely or very challenging.

Many banks acknowledged that they have additional work to do to improve their risk technology systems. While 75% of bank executives consider their institutions to be extremely or very effective in managing credit, market and liquidity risk, only 60% say their technology systems are very effective at supporting the management of credit and market risk, and a mere 47% believe their technology is good at assessing liquidity risk.

Asked what technology improvements they would make in the coming year, 48% of surveyed bankers said they would enhance data quality and management; 44% said they would improve risk reporting.

To learn more about this topic, feel free to tune into a webcast I'll be doing Thursday, February 24, with IDC research director Michael Versace and Ted Luchsinger, director of financial industry marketing at SAP, "An ERM Roadmap." Registration is free.

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