Asia Banking Executives Gather in Phuket to Discuss Risk Management

Tags: banks, insurance, risk management

Last month, 34 banking executives from 11 countries across the region attended the IDC Financial Insights-FICO Asia/Pacific Risk Officer Retreat. We conducted an informal survey, which was spearheaded by two participants, and found some interesting facts and expectations about the tenure of Chief Risk Officers (CROs) in banks.

Let me give a quick run-down:

• On average, CROs have been in their current roles for less than four years.
• The past crisis scaled up everyone's experience tremendously. What they could have gained in five years, they gained in one.
• The demand for risk executives has created a notable dearth of good risk officers in banks.
• A trend of CROs becoming CEOs of financial institutions is expected to emerge in the medium term.

There were snide (but well-meant) commentary about stress tests, Basel 3, modeling, and even the discipline of risk management itself. The discussions also reinforced some notions about the role of risk managers in banks: mainly, that it is a job that requires smarts, business acumen, fortitude, and a grasp of internal and external realities that confront their institutions.

The candid discussions in and outside of the Roundtable also validated our opinions about technology decision-making with regard to risk management. While IT spending in this area will remain high, admittedly, there will be some projects that will be categorized under "risk management," most probably to get immediate management buy-in.

Furthermore, justifications for risk management projects are getting more tactical, just as ROI calculations increasingly get treated differently. Also, technology has matured significantly over the past few quarters and risk officers have a better set of vendors to work with in the year to come. However, finding the right vendor for their organization's needs will continue to be a key challenge. These will find a way into our research agenda in the coming year.

The IDC Financial Insights-FICO Risk Officers' Retreat is designed to be an annual gathering of risk officers to share latest insights about the discipline of risk management, as well as operational benchmarks and best practices discovered in their respective banks. This year's event was held at Cape Sienna in Phuket, Thailand from July 29 to 31 this year. We look forward to continuing these discussions with those who attended and with other FSI executives who couldn't make it but are keen to join in the next gathering.

The retreat also shattered the myth that CROs are too straight-laced and don't have a capacity for humor, as the photos we took during the event show. Check out the photo gallery on the IDC Financial Insights-FICO Asia/Pacific Risk Officers' Retreat Facebook page.

Below: Proof that I was there and doing my job!

 Below: Ample opportunities to network and let our hair down.

Hong Kong Bankers Prepare for Growth as Economy Starts to Recover

Tags: asia/pacific, banks, risk management, economic crisis, hong kong

IDC Financial Insights Asia/Pacific hosted 12 CIOs and IT heads from top Hong Kong banks at our recent Hong Kong Banking Roundtable. This was a closed-door session providing a platform for bankers to deliberate on the critical business, operational, and technology-related issues impacting their businesses, and forms part of a series of roundtables that IDC Financial Insights organizes across the Asian region.

Here, the consensus view was that the economic storm clouds seem to have cleared, with a glimmer of sunshine streaming through.

Latest Hong Kong Monetary Authority (HKMA) data indicates that Hong Kong has pulled out of its deepest recession since the 1998 crisis, and is currently joining Singapore on the road to recovery. The territory's seasonally adjusted GDP expanded 3.3% quarter on quarter in 2Q09, three times as fast as analysts had forecast, and finally ended four straight quarters of contraction.

Nonetheless, still wary of the fragility of the economic situation, Hong Kong bankers are placing concerted efforts to look for sustainable business growth - whether to consciously control expenses to fatten margins, to continually broaden customer engagements, or to undertake initiatives to strengthen payments and transaction services business.

With that in mind, topics that currently preoccupy business and IT divisional heads at the Hong Kong banks center around IT optimization, distribution channels, customer centricity and analytics, and compliance and risk management, most of which are tied to the omnipresent need to manage cost and unlock more value from customer engagements.

Technology optimization sees a focus on application portfolio management to reduce the cost of maintaining business suites, interest in Web-delivered IT services, and always with an eye on a quick turnaround on investments.

Meanwhile, a saturated, competitive market like Hong Kong where almost 200 banks and deposit-taking institutions jostle for wallet share means that creating an integrated and consistent customer experience across all delivery channels is key. Here, banks have entrenched internet banking presence but a weaker toehold for retail mobile banking, and point to the need to prepare themselves for the inevitable wave of mobile adoption.

The call for wider and deeper customer engagements sees increased investments in analytics to slice and dice customer data and accordingly redefine product design and marketing. Elsewhere, shareholders' push for more prudent risk management, reinforced by regulatory pressures, compels Hong Kong banks to review their internal risk control systems and reexamine technology investment in risk detection, avoidance, and management solutions.

The roundtable further sought feedback from participants on their growth strategy and technology initiatives for the short term. Here, the graph below outlines the strategic imperatives at Hong Kong banks over the next 12 months. There appears to be no letup in the focus on risk management and compliance, cost management and operational efficiencies. Banks are working on reining in cost and making the most out of limited resources via undertakings such as improving  processing turnaround times and throughput, reducing process redundancies, and perhaps integrating solutions onto fewer platforms in their drive to weed out inefficiencies.

The Hong Kong banks are also unique compared to peers around the region in that a core imperative includes market expansion - presumably with an eye into China, given plentiful opportunities in the mainland as it avoided the worst effects of the global downturn and still grew a robust 7.1% in 1H2009.

Note: Full insights are captured in the report entitled "Market Analysis: Hong Kong Banking Update 2009" (Doc #FIN219780). This covers discussions from the roundtable as well as the future strategy and technology undertakings of the participating banks for the upcoming months ahead.

Banks Focusing on Credit Risk as They Reel from the Turmoil

Tags: banks, financial services, risk management

While the financial tsunami has washed up the shores of Asia/Pacific and losses to the tune of billions of dollars have resulted in banks slashing technology budgets, there is still money flowing into risk-related projects. These are more easily justified as banks seek to plug risk leakages exposed by the recent market stresses. Consequently, risk-mitigating products and techniques to empower banks to manage credit exposures more proactively becoming increasingly important.

The beneficiaries of these accelerated risk management practices? Vendors operating within the credit risk/Basel II field such as Algorithmics, Moody's Fermat, Fiserv, Misys Almonde, Oracle Reveleus, Quantitative Risk Management (QRM), SAP, SAS Institute, and SunGard.

All nine are worthy contenders in their own right. Those that stood out with particularly distinct features and extensive functionalities include Algorithmics, Moody's Fermat, Fiserv, and QRM. Oracle Reveleus, SAP, SAS Institute and SunGard meanwhile boast a varied footprint of client jurisdictions, while Misys Almonde offers rapid web-delivery deployment and is entrenched with clients in emerging markets.

To ensure alignment of strategies, policy objectives, and business processes with their credit risk framework, banks need to shore up on their current credit risk efforts and nominate a risk champion to ensure that risk awareness pervade the entire enterprise. Beyond ascertaining that vendor functionality offerings correlate with their risk management requirements, decisions also need to be made around areas like the extent of customization preferred, the choice of a multiple versus one-system solution platform, and future functionality requirements.

For a further discussion on credit risk offerings in Asia/Pacific and how banks can enhance their risk framework, please refer to Credit Risk Solution Vendors: Who's Who in Asia (Doc #FIN217509).