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Banks Being Pushed Towards a More Formalised Approach to Risk Management, Say Barclays’ Hayward and BNP Paribas’ Carette

The desire to restore trust and confidence in the market has become the driving force behind much of the investment that has gone into risk management systems, according to Bill Hayward, director of regulatory risk and group risk for Barclays Bank. Speaking at last week’s SAS user conference in Antwerp, Hayward joined Ivan Carette, director of finance and risk at BNP Paribas Fortis in Belgium, in highlighting the more formalised approach to risk management and analytics that has resulted from both regulatory scrutiny and the desire to better manage capital in a tough economic climate.

Hayward noted, however, that this has not been the case across the board, pointing to a recent SAS sponsored Economist Intelligence Unit (EIU) survey in which 39% of respondents said there was an increased appetite for risk systems investment, whereas 33% said there was a decrease. “Although there is a mixed picture of investment at the moment, there has been a definite increase in the complexity of these systems,” he explained. This mixed picture is also likely to swing towards more investment as a result of regulatory intervention and a more prescriptive approach to the risk function.

“A more formalised approach to risk management has been the result of this scrutiny thus far,” said Carette. “A much broader spectrum of risk data is also involved, as banks seek to use these analytics to get a better handle on their overall risk exposure and inform their business decisions.” This data is also coming under direct scrutiny from the regulatory community and therefore data quality programmes have become another focal point for investment.

Carette indicated that his own firm has seen the data underlying risk calculations come under much more scrutiny at a regulatory and industry level, and this is set to increase further. This development has, in turn, led many vendors in the data management and risk analytics solution business to target the management and data quality checks around the data inputs into risk systems. For example, SAS has recently launched a new module, which has been dubbed the SAS Detail Data Store (DDS), underlying its banking risk management platform to do just this.

“The regulatory mindset has changed and there is a much more intrusive approach, especially when it comes to requesting and scrutinising data,” said Hayward. “We are entering a period of intense change, driven by regulators, the market and internal business pressures.”

Carette noted the increased involvement of senior management in the risk function and the different layers of risk data in order to inform business decision making. These cultural changes may be gradual, but they are shifting the risk landscape towards integration and investment. Next year’s EIU survey is likely therefore to highlight this shift in priorities.

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