Risk Management

10:00 AM
Connect Directly

Firms Not Prepared for Increased Risk Analytics Demands

Most financial services professionals do not feel that their firms are prepared to handle the growing needs for in-depth business and risk analytics, according to an InformationWeek Financial Services Analytics study.

Although the financial services industry has been collectively enhancing and expanding its business and risk analytics capabilities since the financial crisis began, most financial services professionals do not feel that their firms are prepared to handle the growing needs for in-depth business and risk analytics. According to an InformationWeek Financial Services Analytics survey of 220 financial industry professionals that examined organizational readiness for meeting current and future business analytics demands, the majority of financial firms are not prepared for the continued growth in data volumes and the ever-shrinking latency requirements for complex analytic tasks.

Investment firms face a wide array of challenges when performing business analytics across the enterprise. Scalability, inflexible architecture, frequent contention for computing resources and inefficient use of existing hardware capacity pose challenges to firms, as does the inability to run larger and more complex analytics. To address these challenges, firms must find ways to improve systems integration and to leverage analytics to keep up with current and future demands.

Are You Prepared?

According to the survey results, however, the majority of financial executives do not believe that their firms' current analytic platforms and infrastructures will be able to keep up over time as acceptable latency for complex analytic tasks shrinks and data rates increase. Firms also report a variety of organizational issues with data control and scalability, and they acknowledge that they are further challenged with a lack of sufficient computing power to perform a variety of analytics essential to increasing efficiency, managing risk, complying with regulations and achieving competitive advantage.

"Firms recognize that they're not as prepared as they should be because their infrastructure hasn't kept up with the dynamic changes in areas such as market changes and speed," says Robert Iati, partner and global head of consulting at TABB Group.

An Enterprisewide View

The lack of data access and integration poses a serious challenge for firms because, in the wake of the crisis, the ability to achieve a comprehensive, enterprisewide view of data and risks across business units, geographies and financial instruments is in high demand. The first step in getting to that point is developing the ability to pull the data out of various business silos.

Risky Business

"If you examine the issues facing firms during the financial crisis, especially in the area of risk management, financial firms were significantly challenged by siloed data and siloed risk applications," says David M. Wallace, industry marketing manager, financial services, at SAS.

Jeff Hong, head of financial services industry marketing at Platform Computing, notes a difference in infrastructure challenges among financial firms of various sizes. "Large corporations may be working on eliminating their data silos and developing a more aggregated view across lines of business. The large corporations may even have a dedicated chief risk officer," Hong explains.

The Song Remains the Same

"Smaller houses may not have the data silos or other issues a larger firm may have," he continues. "But the classic midsize firm that is growing has plenty of complexity but right now lacks the infrastructure to support more complex analytics."

In the current economic environment, it has become essential that firms revisit their risk management approach to determine if their infrastructure has kept up with dynamic market changes or if it is holding them back. Financial institutions might want to revisit their current plans for managing both risk and the rapidly growing volumes of data to ensure that they are prepared to meet both current and future business goals and demands.

Peggy Bresnick Kendler has been a writer for 30 years. She has worked as an editor, publicist and school district technology coordinator. During the past decade, Bresnick Kendler has worked for UBM TechWeb on special financialservices technology-centered ... View Full Bio

Register for Wall Street & Technology Newsletters
Inside Abel Noser's Trading Floor
Inside Abel Noser's Trading Floor
Advanced Trading takes you on an exclusive tour of Abel Noser's New York trading floor, where the agency broker known for transaction cost analysis, is customizing algorithms for the buy side, while growing its fixed income trading and transitions business.