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Data deluge: Risky business or opportunity?

by internationalbanker

SAP - Jane TweddleJane Tweddle, Financial Industry Principal for SAP UKI discusses the importance of aggregating data and the cultural shift required to manage risk and regulatory compliance within today’s financial services environments.


As the risk domain within the financial services sector continues to expand, the role, perceptions and performance expectations of risk management are evolving, both at an individual and institutional level. Gone are the days when risk was merely regarded as a loss mitigation function or a back office department that operates in isolation. The financial crisis of 2008 exposed the inter-dependence between all types of risk and the finance department, ushering in a new era of transparency that demands the convergence of risk and finance controls. Regulatory pressure has, therefore, intensified. 

This intensified pressure, including a significant number of new or changed regulations coming into effect between now and 2019, requires finance and risk functions to work closely together, and this is a culture shift in most organisations. It will mean integrating processes and identifying, sourcing and articulating the ever more granular data required for compliance and disclosure.

More so, research by IDC suggests that by 2020, there will be a 50-fold increase in data compared to 2010. As this volume of data continues to grow and the intensified regulatory pressure prevails, so does the challenge. Obtaining a comprehensive view of the entire risk and finance landscape in today’s regulated data-driven environment is a significant task.

If you cannot measure risk, you cannot manage it. Nevertheless, at decision time, every second counts. The ability to aggregate vast quantities of data from various sources is crucial to keep up with market changes. Only once events, trends and patterns can be identified and analysed by all stakeholders as they happen, can swift and decisive mitigating action be taken across the entire business and the various regulatory bodies.

The key is to be able to collect and harness all insight to enable financial organisations to manage risk and to differentiate themselves in an ever competitive, low-margin market; providing more customised and flexible products and pricing, as well as exceptional customer service. Those organisations that truly understand the benefits will leverage the opportunity from the trends of social, mobile, cloud and big data to transform business and do things differently, in order to:

  • Better understand customers and provide improved services based on individual needs
  • Better manage risk and address compliance and regulatory disclosure requirements
  • Generate a state of the art experience for all customers and internal users
  • Run their business better by being able to make the right decision at the right time
  • Reduce time to market for new products and services 
  • So, what do businesses need to recognise and what actions are needed to keep up with regulatory changes and to increase amounts of data in order to manage risk?

Cultural shift 

One of the biggest challenges is the need for finance, risk and operational departments to work more closely together than has typically been the case.  Processes need to be developed to identify, share and analyse data across the different functions. Recognising the need for change is the first step in understanding what is needed in order to manage, consolidate, mitigate and report on integrated risk and finance data.  

Technological innovations 

Having effective technology in place to support the business is a necessity; enabling integration between risk and finance functions to allow them to work closer together. While this remains a challenge, today, with solutions such as in-memory computing and related finance and risk data models now proven and available to businesses at an affordable price, aggregating data has never been easier. Whilst once it may have taken days to process data and make decisions, businesses are now able to process huge quantities of data at a rate of hundreds of millions of rows per second. Many financial institutions are already implementing this technology to help manage risk, recognising the benefits of being able to make instant decisions in order to identify a toxic aspect of the business before it’s too late. 

Understanding your business 

Part of managing risk means understanding your business and the changing landscape and using this information to drive business advantage as well as compliance. At the same time, teams are becoming increasingly mobile with risk controllers and executives working remotely from different locations; enabling them access to data and insights regardless of location enables users to be alerted to emerging risks and take decisive action with all the facts and figures at their fingertips. 

Harness data

Establishing a clear approach towards harnessing and using data in real time is crucial. By starting with elements of the business that are less critical, such as financial reporting, financial services firms can get to grips with big data without exposing themselves to significant risks. Once the process is in place, they can gradually transition to analysing big data in the critical business functions, including fraud management.

No one says it’s going to be easy but as the new and changing regulations continue to impact the industry, there is a requirement for financial institutions to be more risk savvy. Financial events in our recent history have highlighted the need to renovate risk architectures and enhance risk management strategies. Lessons learned need to be internalised to make businesses more resilient and better equipped to handle future challenges.

Financial services organisations need to review the technologies that are available to enable the operational change that is required to embrace the opportunities for better differentiation, business growth and reduced costs. Only then will organisations be in a position to achieve profitability in what are still difficult economic times.  

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