A Year of Financial Uncertainty

 

Said Tabet, Governance, Risk and Compliance Strategy lead at EMC asks, as we head into 2015, how can financial institutions reduce their risk?

Despite news that employment figures are still increasing, UK retail spend has bounced back and broader trends such as house sales continue to maintain a steady rhythm, so it may appear externally that the market is more stable than it has been for a number of years. Though this is true to an extent, stress tests from last month, which a number of UK institutions failed or came close to failing, along with the government targeting banks in the recent Autumn Statement, it’s safe to say that we’re not on even ground yet.

As we head into 2015, financial organisations need to get their ships in order and, in my opinion, this all centres around data and understanding risk. Here are my key themes for consideration as we go into next year:

  • Data: How much, at what cost and what quality?
    Digital pound - in textFinancial institutions of all sizes are looking to consume more and more data. While this is a general trend with ‘big data’, the use of “smart data” especially will be crucial in 2015. Essentially this takes into account that you need the right data at the right time (context) and relevant data (semantics) that is secure in order to succeed. Improving the productivity and performance of financial products will require discipline at the data level and we are moving more and more towards granular data. Financial institutions must be prepared for this and have measures in place to store, access and understand their data, in real-time.
  • Risk-based approach, still the way to go?
    Banks will continue to adopt a risk-based approach but as the markets start to improve, new innovations push the boundaries and new services emerge, we are going to see more and more of a balanced approach. This is all with the goal to satisfy shareholder requirements while being compliant. In a way, this model will help build a new view of compliance costs as an investment for the future of business. This is also emphasised by the need to develop and transform business processes. Loss of productivity can be measured through big data analytics and the ability to have near real-time relevant data and metadata will support this.
  • Risk will be managed at all levels and integrated with key data and metadata
    Risk is no longer about reporting. Risk management intelligence will be supported with better integration globally, particularly within large firms. The market as a whole is trying to better understand risk and prepare for potential pitfalls in the future, as demonstrated by recent stress tests. What’s concerning is that UK institutions are still falling short of industry expectations and measures, something which must be tackled, and quickly. There is a role for technology here, in ensuring that processes and access are allocated effectively.

2015 has the potential to be a crossroads for the UK economy. With likely changes in interest rates, along with possible changes in government, financial institutions need to be prepared for whatever the future may hold. Now is the time to put in place measures to ensure risk and data are prioritised.

 

 

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