Firms Slow to Respond to Risk Data Management Requirements, Finds JWG

Research by JWG has found that global financial services organisations are not actively reviewing their risk data quality processes following the fall-out of the financial crisis. The study, which includes responses from 20 risk, data, and finance professionals in 16 global firms, shows that, while risk data quality is a pertinent issue, little has changed in the way risk data is managed. This ‘business as usual’ mindset should come as a worrying symptom to firms’ senior management in the face of increased regulatory scrutiny of risk data.

The survey has found that:

• The industry has woken up to the importance of risk data management: 100% of respondents believe that risk data quality is at least an ‘important’ issue.
• However, regulatory pressure has not yet catalysed action: fewer than half of those surveyed say that their firm’s business and risks are aligned.
• Only 22% of those surveyed strongly agree that their respective firms have assigned adequate resources and personnel to risk management improvement programmes.
• Most firms believe that the benefits of improving risk management information (MI) are primarily soft, and the drivers are internal as opposed to regulatory.

It is clear that firms are taking a cautious approach to a complex and costly issue and they have not set the bar very high when it comes to new targets. Furthermore, there is a lack of board-level clarity as to how to achieve these targets.

Despite this laissez-faire attitude, there are some early examples of plans for long-term infrastructure change projects. Large firms have the most work ahead of them as they are faced with the challenge of developing risk management data sets spread across multiple, disparate businesses.

According to JWG chief executive officer (CEO) PJ Di Giammarino: “The big question is to what extent regulators will define and enforce meaningful risk data policy. If the past is any indication, it is by no means certain that they will at all. If they do, however, it is reason enough for boards to be worried.

“We are currently in an 18-month regulatory window in which the industry has a chance to set things right, with Basel III and Solvency II just around the corner. If the industry misses its chance and gets this wrong, there could be severe consequences. Firms could be mandated to increase capital buffers, and more capital tied up would affect the price of credit, the availability of mortgages and loans to homeowners and businesses,” he added.

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