02.12.2015

Risk Management Gets ‘Industrialized’

02.12.2015
Terry Flanagan

As the dynamics around risk technology and operations gather momentum, firms are advised to establish strategic foundations to enable growth, not merely to tactically address regulatory change, according to research firm Celent.

In a report, Celent presents imperatives for financial firms to achieve sustainability for the long haul. Firms will need to keep their eye on the ball and execute to initiatives that matter most to identify and industrialize maturity gaps.

Risk management operations and technology have come a long way since the last financial crisis, but firms are hurting from executing to the weight of industry reform and capital and compliance requirements borne out of the “dark ages,” according to the report.

With financial stability foremost in the minds of politicians and regulators, the rapid thrust for the financial industry to improve and industrialize risk operations is reaching a critical juncture. However, there is much work to be done, as firms on the whole still need to address maturity gaps in many parts of the information delivery value chain.

In the new world where there are shifts towards costly, more intrusive, and data-intensive regulatory regimes, the ability to achieve scale, reliability, and transparency at the right operational economics will be a winning factor for financial services business models.

“We expect that within the next five years, information and metrics production activities for risk management, compliance, and regulatory are more likely to resemble round-the-clock global factories with just-in-time data supply chains rather than uncoordinated clusters of localized cottage industries, as they are today,” said Cubillas Ding, research director with Celent’s Securities & Investments practice and author of the report. “The outlook could be attractive if firms play their cards right, but could be detrimental if response initiatives are not executed cohesively.”

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