Banks would be well advised to adopt a holistic view of risk that ultimately benefits their bottom lines. That’s according to a new Thought Leadership article from Wolters Kluwer’s Finance, Risk & Regulatory Reporting (FRR) business published in association with Risk.net, the leading financial markets magazine that has been providing in-depth news and analysis on risk management and regulation since 1987.
“The year’s extraordinary events have upended the way risk management approaches are implemented among financial institutions. The Covid-19 pandemic has not only changed the nature of the risks investment banks must steel themselves for, but also the operating environment for the enterprise itself,” says Jeroen Van Doorsselaere, Vice President of Global Product & Platform Management for Wolters Kluwer FRR and author of the article.
It is, in fact, critical for organizations to have a clear, measurable definition of their risk appetite, and to understand the interrelations between individual risk types and how they can improve their risk management processes in an operationally cost-efficient way. This begins with integrating audit, risk and compliance – each its own line of defense – into a more holistic process. This, in turn, benefits the business in a period of volatility and uncertainty, while maintaining a protective long-term strategy, Van Doorsselaere argues.
Most present-day enterprise-wide risk management frameworks are compartmentalized, driven by point solutions for the latest dictates from the Basel Committee on Banking Supervision or the International Organization of Securities Commissions, or newer market-specific regimes such as the Fundamental Review of the Trading Book, according to Wolters Kluwer FRR. As a result, they can be increasingly overwhelming to manage, incorporating market scenarios and reporting outputs based on fine-tuning inputs and stressors – such as a new yield curve, interest rate reduction or corporate action – while aiming to understand the specific potential for knockon effects or market contagion.
“The consequences of this approach are manifold. While regulatory reporting has attracted significantly greater investment, it is usually deployed to simply catch up to the next requirement and often siloed within a particular desk or business unit,” adds Van Doorsselaere. “A holistic enterprise-wide risk-management process, however, avoids this scenario. Risk management data platforms must be designed to facilitate collaboration among internal experts and external observers too. They are not just a place to store or process risk data, but a tool to make new risks more visible to a greater audience. If 2020 has taught us anything, it is that all eventualities are now on the table. Enterprise-wide risk management frameworks must evolve to embrace them.”
To help with such concerns banks are turning to OneSumX for FRR, Wolters Kluwer FRR’s best-in-class integrated regulatory compliance and reporting solution suite that establishes a single source of data for finance, risk and regulatory reporting that is enriched with value-added content from in-house experts. The OneSumX for Risk Management module empowers financial services firms to deliver processes, best practices, regulatory intelligence, and the analytics required of businesses in a highly regulated industry. OneSumX for Risk Management not only helps achieve regulatory compliance, but delivers superior business value, seamlessly combining Financial Risk Management with Regulatory Analytics across multiple Risk classes.
Wolters Kluwer FRR, which is part of Wolters Kluwer’s Governance, Risk & Compliance (GRC) division, is a global market leader in the provision of integrated regulatory compliance and reporting solutions. It supports regulated financial institutions in meeting their obligations to external regulators and their own board of directors.
Wolters Kluwer FRR receives frequent independent recognition of its excellence and innovation, celebrating a record year for award wins in 2019. Risk magazine recently awarded the company its coveted Regulatory Reporting System of The Year Award for the third year running and Wolters Kluwer FRR is the #1 provider in both Regulatory Reporting and Liquidity Risk according to the RiskTech100, as compiled by Chartis Research.