« About Kausik |
Main
| Remembering CK Prahalad , The Father of Core Competency »
March 21, 2010
Transformation of Risk IT Function
IT traditionally has been supporting Risk function by providing framework for Calculation, reporting, enablement of workflow, analytic framework and Risk adjusted performance parameters. However due to enterprise data challenge and regulatory deadline pressures IT function has always been in “Catch up” mode with the changing landscape of Risk. After recent financial meltdown when the industry is taking a step back to relook and revalidate the whole risk arena, how IT solutions and products supporting Risk function would change to face the paradigm shift and challenges ahead? The IT function is expected to evolve from support function to provide more predictive model and patterns to enable more forward looking and proactive support to Risk function – a transition that would be eminent for the eventual survival of the Business.
How Predictive is Risk now ?
Perhaps the biggest hurdle a risk officer has to thwart and strategize is to overcome the randomness associated with the financial business. Risk IT department is also facing the insurmountable pressure to consolidate, rationalize and integrate all their systems and platforms but behind all these transitional changes the fundamental question that would crop up - can we have a Risk solution that can help Predict disaster before it strikes?
Can IT solution provide a predictive framework so that one can get an indication of Tsunami ahead of time?
Can we create an analytical platform which would enable detection and recognition of patterns that can give early warnings of risk events that might occur in future so that early precautions can be taken? It is like a Seismic detection system which aims to give early warnings. There are Business scenarios and indicators that can help design a predictive system.
The BCBS recommends scenarios which can definitely act as early-warning indicators, some of them are as follows:
• Rapid asset growth, especially when funded with potentially volatile liabilities.
• Growing concentrations in assets or liabilities.
• Increases in currency mismatches.
• Stock price declines or rising debt costs.
• Widening debt or credit-default-swap spreads.
• Increasing redemptions of CDs before maturity.
• Difficulty accessing longer-term funding.
• Difficulty placing short-term liabilities (e.g., commercial paper).
If we relook at the past and focus on failures of financial institutions (e.g. LTCM), the then macro and micro scenarios can potential get added to the list above. Monitoring of Intraday Liquidity and Collateral Management can also give some potential patterns as well. Analysis of market behavior can lead to detection of unusual behavior like “Herding” , “Domino effect” etc.
Eventually collection and assimilation of all these data can lead to design and build of expert system which would continuously enhance the Risk knowledge base . With the aid of this Knowledge base assessment of the current situations would be possible and can lead to issue of warnings and alerts using sophisticated workflow system to senior leadership and Board members for appropriate and timely actions. Though past is just an indication of future but such knowledge base can still provide good indications of what might come in the future. The predictive model hence would be more diagnostic by nature though eventually it can suggest remedial and self healing steps as well.
What are the impediments?
Data Challenge
Enterprise wide right data definition and accuracy continues to haunt large financial institutions. Success of such expert system and knowledge base driven approach can only be successful if right data is available at right time.
Analytic & Reporting
Complex Analytic routines would demand high system design skills. Right choice of technology stack would also be key. From my past experience of BASEL 2 Implementation for a large European Bank, I have seen 500+ reports were written by a vendor but simple report like in a single day what is the exposure the bank has globally across all asset classes for each market was missing , one needs to manually combine 4 -6 reports to get a single view like that. Later the vendor was awarded the contract of writing such “Simple” reports.
Computing power and right Infrastructure
Such expert system would require high end computing power and right Infrastructure support to make it successful.
Right understanding of the Business
Right understanding of the Business is key to develop a solution that caters the need of the Business. Poor understanding of Business and its needs results into poor functional specification and that is the single biggest source of trouble for all software solutions.
Understanding of each of the scenario, its business significance and relevance would be key to generate the right knowledge base and its applicability to the current situation.
Road Ahead
Regulators globally have already come up with scenario based guidelines so such expert system and solution is no more wishful thinking but going to be real happening in future. However one word of caution it has been seen in the past that all sweeping changes in regulations have only enhanced the revenue of technology and consulting firms in manifold but the predicament of the financial industry and eventually its cascading impact to the miseries of the world economy continues.
Posted by kb0905 at March 21, 2010 11:46 AM
I know it will be cliche to quote Tina Turner songs... but this is "simply the best"! I swear by this like a religious zealot!
Posted by: proactol costumer review at July 22, 2010 10:06 AM
Posted by: Commercial Landscaping Companies at July 26, 2010 12:43 PM
I've to say, I enjoy reading your internet site. Maybe you could let me know how I can bookmark it ? Also just thought I would tell you I identified your internet site through Bing.
Posted by: lacoste shirt buy at August 2, 2010 06:39 AM
Nice information, many thanks to the author. It is incomprehensible to me now, but in general, the usefulness and significance is overwhelming. Thanks again and good luck!
Posted by: Online Consignment at October 9, 2010 04:45 PM
Had been searching a little data for this when i had some troubles with this also. Your blog is pleasantly written and there's good data. Whats your source of wisdom?
Posted by: clenbuterol at October 16, 2010 07:47 PM
I am reading several posts and i'm adding your site to my rss reader , thanks a lot !
Posted by: Prince Racquets at November 20, 2010 11:04 AM
Hey how are you doing? I just wanted to stop by and say that it's been a pleasure reading your blog. I have bookmarked your website so that I can come back & read more in the future as well. plz do keep up the quality writing
Posted by: Backlinks at December 1, 2010 07:11 AM
Hey, I throroughly enjoyed this thread. There are a lot of great comments here. I am going to do a little research on this and stop back and write a relavant post.
I will be checking back soon to review more articles like this and this site as well.
In the meantime.... Keep on blogging!
Posted by: Dewey Stpeter at December 15, 2010 03:13 AM
I love the expression. Everyone needs to express there own opinion and feel free to hear others. Keep it up :)
Posted by: WP Robot at December 19, 2010 03:24 AM
Great blog!! You should start many more. I love all the info provided. I will stay tuned :)
Posted by: WP Robot Discount Code at December 19, 2010 12:15 PM
Admiring the time and effort you set into the weblog and detailed info you offer! I will bookmark the weblog and have my kids check up here regularly. Thumbs up!
Posted by: leather bracelet uk at December 21, 2010 10:14 AM
hello mate this is often fascinating post will make certain I check your posts more regularly! honestly interesting content.If anybody has an interesting articles you can part using me.each way Ill be subscribing into your supply and that i wish you post once again soon.thanks for sharing good info.regards,
Posted by: mens leather bracelets at December 21, 2010 12:41 PM
Thanks for this constructive information. Please keep up the good work. I will be returning often.
Posted by: Adeline Swanner at January 8, 2011 10:04 AM
I'm still learning from you, as I'm trying to reach my goals. I definitely enjoy reading all that is written on your website.Keep the information coming. I loved it
Posted by: Rosa Jankauskas at January 15, 2011 02:58 AM
Kudos for the great piece of writing. I am glad I have taken the time to read this.
Posted by: Garage Organization at January 17, 2011 12:43 PM
I find myself coming to your blog more and more often to the point where my visits are almost daily now!
Posted by: smoobresearry at January 18, 2011 11:47 AM
Very well written post. It will be beneficial to everyone who utilizes it, including me. Keep doing what you are doing - looking forward to more posts.
Posted by: Hong Enslen at January 20, 2011 03:34 AM
Hello.This article was extremely remarkable, particularly since I was browsing for thoughts on this issue last Monday.
Posted by: Darleen Caricofe at January 22, 2011 04:03 AM
I'm still learning from you, as I'm making my way to the top as well. I absolutely liked reading everything that is written on your website.Keep the stories coming. I enjoyed it
Posted by: Odis Knowles at January 24, 2011 09:23 PM
Good article and right to the point. I am not sure if this is really the best place to ask but do you guys have any ideea where to hire some professional writers? Thanks :)
Posted by: Corrina Roets at January 24, 2011 11:17 PM
Credit for the great blog post. I am glad I have taken the time to read this.
Posted by: short casual wedding dresses at January 25, 2011 09:50 AM
I just sent this post to a bunch of my friends as I agree with most of what youre saying here and the way youve presented it is awesome.
Posted by: emiseetum at January 25, 2011 10:01 AM
I happened to stumble across this site searching for different things, glad I stumbled involved with it though. Very interesting.
Posted by: Linda Teague at January 26, 2011 12:03 PM
I've been reading your entries all over my morning break, and I will have to admit the whole article has been very enlightening and rather well written. I believed I might allow you to recognize that for a few reason why this weblog does not view well in Web Explorer 8. I desire Microsoft may forestall changing their software. I have a question for you. Might you thoughts replacing blog roll links? That would be truly neat!
Posted by: Free Blog at January 26, 2011 06:55 PM
excellent information keep up the work! thanx
Posted by: Lazaro Iglehart at January 27, 2011 11:12 AM
Hrmm which was weird, my comment got eaten. Anyway I needed to say that it is nice to know that somebody else also mentioned this as I had trouble finding the exact same info elsewhere. This was the initial place that told me the solution. Thanks.
Posted by: Melvin Eichorn at January 28, 2011 11:03 AM
This really answered my problem, thanks!
Posted by: adsl vnpt at January 28, 2011 02:51 PM
I honestly didn't consider this specific matter that way. I think that there's a point in all of this. Happy to be capable to get involved. Wish you luck.
Posted by: jak napisać CV at January 28, 2011 09:32 PM
Thanks for making the sincere try to provide an explanation for this. I feel very robust approximately it and would like to be told more. If it's OK, as you reach extra intensive knowledge, may you thoughts including more posts similar to this one with additional info? It would be extremely helpful and helpful for me and my colleagues.
Posted by: new baby gifts at January 29, 2011 05:29 AM
Maintain the excellent job mate. This web blog publish shows how well you comprehend and know this subject.
Posted by: varicella titer at January 29, 2011 08:48 AM
Great article. Waiting for more.
Posted by: Janell Mars at January 30, 2011 06:11 PM
This page appears to recieve a large ammount of visitors. How do you promote it? It offers a nice individual twist on things. I guess having something authentic or substantial to say is the most important factor.
Posted by: Ernesto Ritchlin at February 2, 2011 09:10 AM
Finding this site made all the work I did to find it look like nothing. The reason being that this is such an informative post. I wanted to thank you for this special read of the subject. I definitely savored every little bit of it and I have you bookmarked to check out new stuff you post.
Posted by: Butik Online at February 2, 2011 09:12 AM
Excellent issues?I would notice that as someone who actually doesn't write on blogs so much (if truth be told, this may be my first publish), I don't assume the time period 'lurker' may be very turning into to a non-posting reader. It's now not your fault in the least , however possibly the blogosphere could come up with a greater, non-creepy title for the 90% folks that revel in reading the content .
Posted by: froutakia at February 2, 2011 10:13 AM
I used to be pretty pleased to locate this nice website.I want to to appreciation for this great browse I positively enjoying each bit of it and that I have you ever bookmarked to visualize out new stuff you post.
Posted by: Gale Ermogemous at February 2, 2011 10:46 AM
I learned alot by reading your article. Keep up with good posts.
Posted by: Lease Purchase Agreement at February 2, 2011 04:07 PM
I was very excited to see this site.I wanted to thanks for this great article! I definitely enjoying every little bit of it and I have you bookmarked to check out new stuff you post.
Posted by: super mario games at March 7, 2011 01:39 PM
Throughout the great scheme of things you actually secure an A+ for effort and hard work. Where you actually confused everybody was on the specifics. As it is said, the devil is in the details... And it couldn't be more correct right here. Having said that, allow me tell you precisely what did work. Your authoring can be incredibly engaging which is most likely why I am making the effort in order to opine. I do not make it a regular habit of doing that. 2nd, while I can certainly notice the jumps in logic you make, I am not necessarily convinced of how you seem to unite your ideas that help to make the actual conclusion. For now I shall subscribe to your point but trust in the foreseeable future you connect your facts better.
Posted by: recycled goods at March 7, 2011 02:31 PM
as I website owner i believe the written content here is rattling wonderful, regards for your efforts.
Posted by: Merlin Muhtaseb at March 7, 2011 05:43 PM
I’m not that much of a internet reader to be honest but your blogs really nice, keep it up! I'll go ahead and bookmark your site to come back later. All the best
Posted by: buy hoodia gordonii at March 7, 2011 07:32 PM
I liked reading your weblog, thanks for posting this kind of nice content.
Posted by: Kraig Rohner at March 7, 2011 08:17 PM
I thought it had been going to be some boring recent website, but I’m glad I visited. I will post a link to this web site on my blog. i am positive my visitors will find that terribly helpful.
Posted by: Jeanelle Odougherty at March 7, 2011 11:02 PM
Hiya! You some kind of professional? Great message. Can you tell me learn how to subscribe your blog?
Posted by: Dominic Brecht at April 5, 2011 06:30 AM
Excellent! Your article has a ton comment posts. How did you get so many viewers to look at your site I'm jealous! I'm still learning all about blogs on the web. I'm going to look around on your website to get a better idea how to get more visable. Thanks!
Posted by: Rufina Hash at April 5, 2011 03:16 PM
Great article. Waiting for more.
Posted by: Eugene Lehrke at April 5, 2011 04:55 PM
I feel like you could probably teach a class on how to make a great blog. This is fantastic! I have to say, what really got me was your design. You certainly know how to make your blog more than just a rant about an issue. Youve made it possible for people to connect. Good for you, because not that many people know what theyre doing.
Posted by: buy Tricor at April 5, 2011 08:08 PM
What a great web log. I spend hours on the net reading blogs, about tons of various subjects. I have to first of all give praise to whoever created your theme and second of all to you for writing what i can only describe as an fabulous article. I honestly believe there is a skill to writing articles that only very few posses and honestly you got it. The combining of demonstrative and upper-class content is by all odds super rare with the astronomic amount of blogs on the cyberspace.
Posted by: ReaderBuzz at April 5, 2011 09:18 PM
I was very excited to see this site.I wanted to thanks for this great article! I definitely enjoying every little bit of it and I have you bookmarked to check out new stuff you post.
Posted by: race car games at April 5, 2011 10:32 PM
There are certainly a lot of details like that to take into consideration. That is a great point to bring up. I offer the thoughts above as general inspiration but clearly there are questions like the one you bring up where the most important thing will be working in honest good faith. I don?t know if best practices have emerged around things like that, but I am sure that your job is clearly identified as a fair game.
Posted by: buy Tricor at April 6, 2011 01:22 AM
Of course, what a splendid blog and revealing posts, I surely will bookmark your blog.Have an awsome day!
Posted by: free credit report at April 6, 2011 08:18 AM
Howdy! I could have sworn I've been to this site before but after reading through some of the post I realized it's new to me. Anyhow, I'm definitely delighted I found it and I'll be bookmarking and checking back often!
Posted by: Gwendolyn Yanofsky at April 7, 2011 05:03 AM
Incredible! Your article has a lot readers. How did you get all of these bloggers to view your post I'm very jealous! I'm still studying all about article writing on the internet. I'm going to view pages on your website to get a better idea how to achieve success. Thanks for the assistance!
Posted by: Rebbecca Vrieze at April 7, 2011 07:13 AM
Your ability to convey this sort of information and facts is just what all of us want. By revealing your understanding you assist other folks thru sharing your very own insights. And I will let you know now your article aided me.
Posted by: whole house water filtration at May 25, 2011 06:29 AM
I’m not sure where you're getting your information, but great topic. I needs to spend some time learning more or understanding more. Thanks for fantastic information I was looking for this info for my mission.
Posted by: spodnie dla kobiet at May 25, 2011 07:52 AM
Thanks for another informative website. The place else could I am getting that type of information written in such an ideal way? I have a mission that I'm simply now working on, and I have been on the look out for such information.
Posted by: Slacker Mommy Blogger at June 12, 2011 07:33 PM
You made some good points there. I did a search on the topic and found most people will agree with your blog.
Posted by: Carolee Wohlford at June 13, 2011 01:39 AM
Some really interesting details you have written.Helped me a lot, just what I was looking for :D.
Posted by: Dario Gioriano at October 30, 2011 03:40 PM
I’d should check with you here. Which is not something I usually do! I get pleasure from reading a post that can make folks think. Also, thanks for permitting me to comment!
Posted by: kredyt gotówkowy na dowód at November 4, 2011 02:14 AM
Post a comment
