ABA Banking Journal - April 2010 - (Page 28)
tech topics | risk analytics To satisfy exam pressure, you need a risk narrative The right tools provide both data and a narrative to satisfy regulators Daniel Moloney, president and cofounder of SwiftKnowledge, an analytics firm based in Eden Prairie, Minn. It’s a matter of context and perspective that can also handle the unlikely or improbable crisis. Even enterprise risk management solutions, despite their name, aren’t necessarily able to add everything up to a relatable story, consultants told ABA BJ. Something more automated, something more sanity-producing—is called for. Rodney Nelsestuen, senior research director, Financial Strategies and IT Investments at Needham, Mass.-based TowerGroup, says he’s having conversations with community bankers that “don’t want to look stupid” during examinations. Moloney relates that, in recent months, he’s been contacted by board members and senior executives at community banks who have been told by regulators that they will need to conduct more-advanced stress tests. He says the SwiftKnowledge solution will give bankers more information—on profitability, cashflows, capital adequacy, and other details—than can be obtained by manually working around the limitations of core-processing reports. As a vendor, one could argue, Moloney has an agenda. Yet other risk experts agree that a more holistic perspective will be required and with it, examiners will need a risk story. “The risk profile has to have a narrative that senior management can act on,” says Henry Ristuccia, a New York City-based partner at Deloitte & Touche. “And it will always be changing, so there needs to be some connection between transactional systems and daily operations. There needs to be a mix of top down and bottom up assessments.” Doug McGregor, CEO, WebEquity Solu- W hen it comes to demonstrating regulatory fitness, it’s not enough for risk analysts to toil with black boxes to create some kind of risk-posture report. Examiners are pushing for more in the way of stress-testing capabilities and analysis that explains, in clear terms, the impact of the slings, arrows, and outrageous fortunes faced by banks. Until now, banks that used analytics to assess a product or channel performance may have had a decent sense of risk tied to a piece of the business, but tended to be far less able to define how any given part (of an investment, loan, or strategy) affected the whole institution, notes 28 | ABA BANKING JOURNAL | april 2010
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.