As incidences of operational risk intensify, their substantial cost and ramifications bring to light the undeniable correlation between operational risk management and sound business practice. There is thus an analogous need for Asian bankers to accelerate their implementation of operational risk management solutions.
As such, I analyzed the principal operational risk solution vendors participating in the Asian market and the solutions they provide in a recent report, with the intent to equip banks with useful information to assist them in narrowing down their search for the most appropriate operational risk solution vendor.
In that document, I suggested the following vendor management pointers:
- Investigate the vendors' current offerings and future expansion path: Examine the future plans of vendors to ensure that they offer tools that effectively cover an institution’s existing portfolio and also accommodate further updates. This is crucial to ensure that the organization does not inadvertently select a solution that caters to the current risk management situation, but fails to grow with the bank in the future.
- Explore vendors' footprint of reference clients; gravitate towards those dedicated to the market via continuous commitments in research and development (R&D): For instance, a substantial clientele list implies a risk management solution that is tried and tested and hence, less risky.
- Consider the size of the vendor, turnover, market share and financial stability: These factors serve as indicators of their ability to remain in operations, invest funds for innovation and research, and withstand financial catastrophes.
- Take note of rankings that demonstrate end-user confidence in their risk solutions: Industry accolades and awards won by the vendor could be a barometer for innovation. However, these need to be recognition given to vendors based on objective, unbiased end-user polls. On the contrary, rankings given in lieu of advertising space in publications are not necessarily objective and should not carry the same weightage.
…But also look beyond merely plugging-and-playing vendor solutions
Nonetheless, to measure, monitor and mitigate risk, it is necessary for banks to look beyond mere dependence on operational risk vendor technologies. They need to invest in improving operational processes and undertake regular risk assessment exercises to ensure the existence of adequate risk coverage levels. As operational risk is highly correlated to people risk, in addition to having the appropriate systems, solutions and processes, institutions should be cognizant of cultural attitudes towards risk, and empower managers to link risk management to long-term strategic business objectives.
As a matter of fact, because of the huge amount of data that flow out of an operational risk management program and the far-reaching tentacles of operational risk, projects can easily suffer all of the worst IT implementation problems. This may include scope creep, too many managers, or, conversely, a lack of strong senior-level advocates. Without a strong focus and a reliable project manager, investments in operational risk management will never produce demonstrable results.
Note: More information on the operational risk solution vendors in Asia/Pacific is available in at http://www.idc-fi.com/getdoc.jsp?containerId=FIN229455. Detailed coverage includes that for Algorithmics, IBM OpenPages, Methodware, Oracle Financial Services Analytical Applications, SAP, SunGard, and Wolters Kluwer Financial Services