Abstract
This Financial Insights report, based on a survey of senior executives
responsible for coordinating their change management programs for risk
management, unveils the extent of the groundwork that has been laid for Basel
II. Besides addressing their Pillar I initiatives, respondents further shed
light on their IT investments and vendor selection criteria. Using our survey
findings as a guide and supplementing it with our industry knowledge and
experience, we propose key prescriptions for banks keen to get their risk
management implementation up to speed and suggestions for vendors intent on
capturing that risk spending. Our results will provide a useful benchmarking
tool, best practices information and, we hope, a call to action for banks and
the vendor community serving this space.
"With banks moving beyond a mere compliance-focused view to finding
opportunities to improve operational performance, we also queried respondents
on how their risk initiatives are driving value as they continue to operate in
today' s increasingly volatile financial markets," commented Li-May Chew, CFA,
senior research manager for Financial Insights' Asia/Pacific Insurance Advisory
Service.
Table of Contents
- Table of Contents
- Financial Insights Opinion
- In This Report
- Situation Overview
- Pillar 1: Quantitative Minimum Capital Requirements
- Credit Risk
- Figure: Current and Planned Regulatory Capital Frameworks for Credit Risk
- Figure: The Maturity Phase of Current Credit Risk Management Programs
- Figure: Credit Risk Management-Related Technologies/ Methodologies Implemented
- Figure: Investment Priority/Focus of Organizations' Credit Risk Capabilities
- Figure: Implementation Challenges for Credit Risk
- Data Collection and Centralization
- Figure: Number of Years of Historical Data Currently Available for Basel II
- Figure: Expected Change in Capital Position as a Result of Basel II
- Operational Risk
- Figure: Operational Risk Categories
- Figure: A Typical Operational Risk Management Structure
- Figure: Current and Planned Regulatory Capital Frameworks for Operational Risk
- Figure: Maturity of Current Operational Risk Management Programs
- Figure: Operational Risk Management-Related Technologies/ Methodologies Implemented
- Figure: Investment Priority/Focus of Operational Risk Capabilities
- Figure: Implementation Challenges for Operational Risk
- Market Risk
- Figure: Current and Planned Regulatory Capital Frameworks for Market Risk
- Beyond Pillar 1
- Pillar 2: Qualitative Supervisory Review Process
- Pillar 3: Enhancement of Market Discipline
- Investment Estimates
- Figure: Estimated Basel II Spend for the Entire Implementation Period
- Table: Estimated Basel II Spend
- Figure: Estimated Systems Investment Share of Spend
- Figure: Systems Procurement Method
- Vendor Assessment
- Table: Vendor Solutions Currently Utilized or Being Considered for Credit Risk
- Table: Vendor Solutions Currently Utilized or Being Considered for Operational Risk
- Table: Vendor Solutions Currently Utilized or Being Considered for Market Risk
- Figure: Selection Criteria for Vendor Solutions
- Future Outlook
- Risk as a Driver of Value
- Figure: Major Benefits Expected from Basel II Adoption
- Figure: Areas of Risk Representing Potential Threat to Earnings
- Figure: Drivers of Change for Risk Management Priorities over the Next 12 Months
- Figure: Business Processes Inclusive of Participation from the Group Risk Management Committee
- Enterprise Risk Management
- Figure: Adoption of ERM Programs
- Figure: Respondents' ERM Priorities
- Essential Guidance
- Actions for Financial Institutions
- Actions for Vendors
- Learn More
- Related Research
- Appendix
- Respondent Demographics
- Figure: Respondents' Participation by Country
- Figure: Respondents' Asset Size in FY05/FY06
- Figure: Presence of a Chief Risk Officer
- Figure: Direct Reporting Line of the CRO
- Synopsis
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