Integrating Finance & Risk Information

Taking control & staying in the driving seat with risk demands a joined-up approach to risk management

The “integration why bothers” – key industry trends that drive the urgent need to integrate finance and risk information
  • The rules set higher capital requirements, but capital itself is scarce and expensive. New rules under Basel III stipulate additional capital buffers. In OTC derivatives, more effective capital usage is even more pressing. It demands greater focus on returns optimization through risk-weighted measures.
  • Stricter regulatory controls means risk profiles and policies are no longer “private information”. Basel II and III, IFRS and Solvency II require financial institutions to demonstrate their management of risk and capital. This entails detailed disclosure of risks and other information relevant to stakeholders.
  • Cost-effectiveness. Margins are under pressure and costs have to be cut. Integrating finance and risk presents substantial cost-saving opportunities, realized from data, reporting processes and supporting systems that are all common rather than siloed and disparate.
  • A 360, 365 view. Stakeholders demand a consistent, rounded and real-time view of the business. Investors, ratings agencies and other stakeholders demand precise reporting. They expect financial institutions to provide a consistent, informed and accurate management view across finance and risk.
  • The market expects. Need and desire for understanding of risk profile and risk behavior have increased substantially, following the global financial crisis. To build trust on the outside, overall risk management thinking and approach need to be strengthened on the inside. This is achieved by designing an organization that places risk control firmly at its center. This is about more than compliance. Really accurate risk profiling has become a key component in assessing core enterprise value.

The “integration issues” – some barriers to integrating finance and risk

Financial institutions have already launched many initiatives in pursuit of a key objective: incorporating risk-based data into financial and performance management. Some work. Just as many fail, for two recurring reasons:
  • Disparate cultures. Typically, there are significant differences between perspectives and cultures between the finance, risk and IT functions.
  • Disparate data practices. Positive change has to overcome operational issues that include separate and multiple data sources, inconsistent data definitions, and lack of common language usage across functions.

Driving greater enterprise value and control of risk demands greater alignment between risk, finance and IT. In reality, a new and significantly improved degree of alignment is a prerequisite for successful outcomes. It must be in place before starting any technical integration program, or the consolidation of risk data, systems and controls.

How can Capco help?
Capco can help align and integrate finance, risk, treasury and IT capabilities at the optimum level. Our expertise includes the following direct advantages for our clients:

  • Proven specialists - experienced teams specializing in finance, risk and IT transformation.
  • A unique approach - to the design of the target architecture for integrated finance and risk based on enterprise-wide and embedded business and IT principles, that best suit each specific situation.
  • Roadmap - for effectively implementing the target architecture and data integration architecture.
  • Prototyping tools and frameworks - to reduce design and implementation time and cost.
  • Proven and flexible implementation approach - fully adjustable to client capacity and desired speed of realization. Our solution is based on modular implementation of improvements - as an alternative to ‘big-bang’.
  • Proven methodology - for selecting software for integrated finance and risk reporting.