In the wake of the Sarbanes-Oxley Act (SOX), Basel II and other regulatory initiatives worldwide, risk management, corporate governance, and compliance are major focal points for management. Governance starts with performance. It reflects the highest-level balancing act for management: Are we performing to shareholder expectations? Risk starts with the flip side of performance: Are we successfully taking and managing the right risks to sustain this performance? Compliance sets the rules by which we must play: Are we complying with regulatory requirements?
Management must understand and balance these business forces to ensure longterm success with customers, investors, employees and the law. As companies begin to manage risk, they typically come to the conclusion that they cannot manage risk in an ad hoc manner by vertical business unit, by specific regulation or by domain; it becomes apparent that risk management must be conducted in a structured way and integrated throughout the whole enterprise. This entails a number of elements, such as the definition of risk; the formation of a risk oversight role, defined tolerances, policies and procedures for dealing with risk; the inclusion of risk as a factor in business decision-making; and the reporting of risk in a consistent manner.
Furthermore, risk management must be comprehensive and span all risks to understand and manage the interplay among various types of risks and the fact that certain events carry with them more than one type of risk. Financial risk is important, but reputational risk must be factored in as well. This means gaining clear insight into a host of reputation metrics such as customer attrition and satisfaction, negative press mentions, investor confidence, ad spend on brand, fines, lawsuits and more.
Management needs a clear understanding of the bank's major categories of risk and, most importantly, its level of exposure to these risks. Its ability to communicate these risks while instilling confidence in investors and regulators that it is managing them appropriately is critical. While risk appetite is what generates returns, regulators, customers and investors expect the controls for these risks to be solidly managed. An enterprise risk dashboard brings together all the key risk exposures— credit risk, operational risk, market risk, reputational risk and more. With this dashboard, management can review changes in exposure and evaluate the potential impact on capital allocation throughout the operation. Drilling down into the risk management decision areas gives management additional insight into inherent risk (such as loss events, loss amounts or risk assessments), and into the methods of responding to risk (such as avoidance, reduction, sharing and acceptance).
With IBM Cognos solutions, banks can answer the key questions that are critical to better profitability, investor relations, compliance, and overall performance. Fastgrowing, decentralized organizations can pull data from different sources quickly to accelerate decision-making and drive better risk management. With IBM Cognos software, you can invest in a solution that lets you:
• Report and visualize consolidated risk positions throughout the organization to support wider distribution and awareness.
• Analyze consolidated or individual risk profile by business unit, region, client, loan officer, risk class and more.
• Publish reports from centralized risk management group to risk managers, and allow self-service ad hoc reporting.
• Create and distribute KRI scorecards to support process change.
• Aggregate data from disparate risk environments.
• Receive timely notification of risk events, such as downgrades or crossing limits thresholds.
Whether you're the chief risk officer, vice president of a business unit or CFO, IBM Cognos software provides the tools you need to gain a competitive edge.
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BI CENTRE
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