Perspectives on the Future of Risk Management

Executing to a Successful End Game
by Cubillas Ding,  Medy Agami, November 11, 2013
Industry Trends
Global

Abstract

Firms should avoid missing out on real possibilities for technology-enabled innovation. This report highlights execution considerations when going to market with risk technology.

Financial institutions are faced with a once-in-a-lifetime opportunity (or threat, depending on one’s point of view). Risk management practices are being overhauled in response to volatile market conditions, weighty regulation, and the evolution of transactional technologies, according to the report Perspectives on the Future of Risk Management: Executing to a Successful End Game.­

More broadly, the financial landscape is rapidly becoming a multifaceted playing field, with constraints in capital, demands for higher accountability from regulators and investors, and the complex undertaking to alter the shape of the business to meet return targets. Firms are striving to realize an optimal collateral mix, reduce financing costs, manage counterparty credit exposures, and drive vital competitive advantage in the shakeout.

"When discussing the future of risk management, we find that market participants are aware of how the opportunities and threats associated with the business are now inextricably tied to risk practices, which in turn are tied to capital and margin collateral, and linked to the deals in which you participate, the firms you transact with, how you transact, and where you clear, " says Cubillas Ding, Celent Research Director and author of the report.

Yet, when financial firms are enhancing or installing new risk IT platforms, the adoption of next-generation technologies and the delivery of real innovation do not necessarily happen in tandem, nor by default. The conundrum, with firms heavily involved in compliance-led initiatives with tight deadlines and reporting obligations, is that real possibilities for technology-enabled innovation can be missed.

“It is far simpler to embrace buzzwords around ‘advanced analytics,’ ‘real time,’ and ‘firmwide risk views’ than to be strategic in employing these elements to drive innovation,” Ding adds.

This study, commissioned by SAP and executed independently by Celent, was conducted to understand how senior executives within the financial industry envisage what risk management activities will need to look like and to share perspectives on how firms can formulate the right strategies.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

Introduction to Market Study

2

 

Fallout from the Crisis: The Opening of Pandora’s Box

2

Facing Heightened Uncertainty, Changing Fortunes, and Evolving Dynamics

3

Implications for Risk Technology: Paths Towards a Successful End Game

4

 

Aggressively Remove “Legacy Baggage”

4

 

Explore Business Innovation Simultaneously with the Implementation of Next-Generation Technologies

5

 

Design Stakeholder-Centric Information Chains Underpinned by a Cohesive Risk Data Strategy and Analytical Capabilities

6

 

Execute Systematically to Capital Efficiency Initiatives to Achieve Optimal Impact

8

 

Employ Strategic Levers in the Delivery of Technology

10

Final Thoughts: Stepping into the Big Unknown

11

 

Changing Fortunes: Winners and Losers

11

Leveraging Celent’s Expertise

12

 

Support for Financial Institutions

12

 

Support for Vendors

12

Related Celent Research

13

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