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Changing global dynamics
call for executives to astutely manage their risk profiles to ensure that their
financial institutions not only survive but thrive in this "new
normal" environment — an environment where bankers have to deal with a
climate of protracted slow growth and hyper competition. With various forces
converging to push risk management into the consciousness of senior bankers
across Asia/Pacific, we conducted a CRO Survey polling 40 banking Chief
Risk Officers (CROs) and their deputies from across 11 Asia/Pacific nations to
shed light on core risk initiatives and the associated business drivers.
Herein,
IDC Financial Insights found that despite the weak economic environment, purse
strings continue to be somewhat loose when it comes to technology investments
for risk, with only a negligible 2.7% of respondents expecting weaker risk
budgets in 2013 (See Figure 1). On the contrary, 62.1% forecast rising
technology budgets for risk management, with more than a third projecting at
least a 7% increment in spending in 2013.
Figure 1:
Investment Growth in Risk Management Solution, 2013
Q. Our institution's capex and opex on risk
management implementation for 2013 will grow by:
Source: IDC Financial Insights' CRO Survey, January 2013
Our
findings reveal that while capital remains precious, IT and risk offices at
financial institutions are cognizant of the need to establish a fine balance
between driving business strategies and enhancing risk management controls. In
order of importance, banks in Asia/Pacific are investing on credit analytics,
enterprise data management, and enterprise risk dashboards and reporting — and
because all the tools are irrelevant without the right people to utilize and
manage them — on skilled risk management staff, which is becoming a rare
commodity in Asia/Pacific these days. This brings our forecast for total risk
spending on risk technologies by Asian banks to US$7.65 billion in 2013.
Other nuggets of
information uncovered from the interviews include the fact that as the region
continues to reel from the aftereffects of the financial turmoil, all
respondents' credit risk teams are continuously enhancing the quality of their
portfolio by upgrading their credit risks infrastructure, processes, and risk
management tools. Meanwhile, 53.8% of those surveyed claim to have instituted
enterprise risk management (ERM) on a companywide level. (Although I would
think this is subjective, depending on how they define ERM.) In any case,
crossing lines of business with enterprise risk management strategies, talent,
and technical infrastructure is a necessity to ensure that the full range of
risk is being actively managed and resources are being applied as effectively
as possible.
What I found surprising —
and obviously good news for risk management vendors out there — is that a
substantial 77.2% of respondents agreed that risk vendors could possibly
(though not necessarily) provide a greater level of risk analytic ability than
could be found internally and, as such, are increasingly open to outsourcing to
risk management specialists. If so, are they transitioning toward the
utilization of cloud-based risk solutions? While this trend is increasingly
prevalent in other regions, only 30.8% of the surveyed are sufficiently
comfortable to do so at the present moment, citing data privacy and security
regulations as core inhibitors.
As banks across
Asia/Pacific scramble to remain ahead of the risk management curve, plug gaps
within their risk management framework, and exploit the disruptive third platform
technologies of Big Data and analytics, cloud computing, social business, and
mobility, 2013 will witness their CROs continuing to elevate risk management to
a high strategic priority internally. Risk executives will further engage in
new dialogues with the Chief Investment Officers to ensure that risk is
integrated with all business technology decisions, seek out new tools for risk
management to cope with the "new normal" environment, and invest in
programs to ensure that risk management skills, code of ethics, and compliance
obligations are developed and understood across all strata of the institution.
A lot seems to be on the
plate of CROs at Asian banks for 2013, and we at IDC Financial Insights will
continue tracking these developments — so watch this space!
For detailed survey findings
covering the Asia/Pacific banks' CROs' investment considerations and process
instituted for financial and enterprise risk management, opinions on the role
of risk vendors, their top enterprise risk initiatives for 2013 and
expectations around changes in risk budgets going forth the next 12 months,
plus action items for risk executives and risk management vendors to consider,
please refer to "Business Strategy: Asia/Pacific CRO Survey — Risk
Management in the "New Normal" Environment" (Doc # FIN239279, February 2013).
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