ABA Banking Journal - December 2008 - (Page 34)
RISK MANAGEMENT richer data sets, notes Colin Shearer, senior vice-president of market strategy, SPSS Predictive Analytics Software, based in Chicago. “You need to create rules-based automation but still leave room for human expertise and refinement of models over time,” Shearer says. “Part of that complexity is looking at how your customers and your products actually behave and modeling with that information.” Soft data, such as information from a small business customer’s suppliers and customers, needs to supplement traditional data about performance. Risk models still needed Despite obvious modeling challenges, the notion of risk management hasn’t been discredited by the credit risk tsunami, according to Gary Sturisky, global practice leader Internal Audit & Controls practice for Jefferson Wells, who is based in Atlanta. Instead, the crisis simply points out the need for more accurate data, and for models that more employees can understand. “It’s really a shame that Basel II era compliance didn’t have more time to take root,” he says. “You’ll see a big push by regulators to connect risk management to compliance efforts,” says Tom McEvilly, U.K. sales director for Atlanta-based Checkfree. In a white paper on cross-regulation compliance, McEvilly expected such critical business processes as exception management to be a foundation, with clean data driving both risk analytics and control activities such as approvals, authorizations, verifications, reconciliation totals and transactions, and segregation of duties. “What many institutions need is a technology infrastructure that allows them to meet Sarbanes-Oxley, MiFID (Markets in Financial Instruments Directive in Europe), AML, Basel II, and be able to evaluate potentially risky scenarios.” Regulators will expect progress. Gunderson believes that a more evenly distributed risk delivery approach can help individual banks better control their environments. “You need to take risk from the middle office out to the front office and marry it to stronger governance,” says Gunderson. Certainly, he says, regulators will be better armed with tools that will help them examine bank exposures more rigorously. BJ 34 DECEMBER 2008/ABA BANKING JOURNAL www.ababj.com/subscribe.html
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