September 30, 2013

Accenture's recently released 2013 Risk Management Report finds capital markets firms are elevating the roll of risk management and incorporate it more aggressively to their business strategies.

To that end, the report found capital markets are deeply focused on developing risk infrastructure, including technology, data, and analytics, over the next two years. The greatest obstacles to those plans were reportedly outdated legacy systems (44%) and lack of system integration (33%).

As Accenture notes, the capital markets are one of few industries to list system issues, rather than human resources issues, as the greatest barrier to development.

Here are some other interesting findings from Accenture's global survey of 446 executives over 7 industries and 2 government sectors:

- 98% of all organizations consider risk management more important than it was two years ago.
- 84% of capital markets firms plan to upgrade risk infrastructure capacity over the next year.
- 89% of capital markets firms rate the importance of their risk organization as important or critical as a means of enabling long-term profitable growth.
- Organizations having a chief risk officer, either with or without the formal title, has risen from 78% in 2011 to a near-universal 96% in 2013.
- 96% of risk management owners now report directly to the chief executive officer.

Coordination

Given that all areas of risk are expect to increase "it's pretty clear," says Steve Culp, global managing director for Accenture Risk Management in a video, "that organizations realize that an effective risk management function must also have a direct line and a voice to the top of the organizational tree"

Chris Thompson, managing director, leads Accenture's Risk Management practice in North America. He said in an interview that there was more collaboration between things like front office responsibilities and risk management. "Of those surveyed, 82% said there's a high degree of coordination. I think that’s real progress" he says. "I think they were very separate from years gone past, but people have been pushed for it and now people are largely there."

According to the report, that coordination between the front office and risk function include working from the same models, with the same data sources and the same calculators.

Meeting Risk Amid Technology Challenges

For Thompson, one of the more noteworthy takeaways is the prevalence of legal risk. At 60%, legal came in as a top external pressure executives see rising over the next two years, followed by business risk, credit, and regulatory risk. 83% of the banking respondents expected legal risks to rise somewhat or significantly over two years.

"Not surprisingly," reads the research report, "the other main area where respondents want to build capabilities is in risk data and technology. Only one percent of respondents claim they have achieved mastery here." 84% of capital market firms said they planned to make changes in the next 12 to 18 months.

Half of respondents criticized management for lack of integrated response to regulatory reform, says Thompson who adds that they see this on the ground with clients. "We have one client building out a FATCA solution but in the bank there’s another way of thinking about on-boarding customers... A lot of money is being spent on this, but it's a complex global institutions and spending money efficiently is hard." To that point, 50% of respondents were critical about architectural challenges.

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ABOUT THE AUTHOR
Before joining UBM Becca served as Editor-In-Chief at Kapitall Wire, the sister site to an online brokerage firm that combines the challenges of the stock market with the thrill of ...