Bridging the gap between risk data and business benefits

Risk data as a value generator

In recent years, financial institutions (FIs) have invested significant time, resources and money to transform their risk data aggregation and risk reporting (RDARR) infrastructure to comply with BCBS 239—the Basel Committee on Banking Supervision’s 14 principles for effective RDARR.

While the purpose of RDARR is to improve data quality, reporting accuracy and the rigour applied to major banks’ risk decisions, the principles also create an extraordinary opportunity for FIs to move beyond mere compliance. In fact, FIs can use this initiative to uncover new business opportunities, reduce costs, mitigate risk and grow the business—but only if they enhance their data analytics capabilities.

The key here is for organizations to extend their analysis to business and customer data, rather than confining it to risk data. As banks move towards this more integrated data model, they can begin to combine enterprise data with internal and external data sources to create a knowledge framework from which further analytical processes can flow.

This, in turn, positions FIs to:

  • Make more accurate loss projections
  • Improve capital management
  • Make better, faster decisions at lower cost
  • Develop more targeted products, services and sales strategies
  • Identify growth opportunities with the highest risk-adjusted returns

By addressing five essential building blocks—strategy, people, process, data and technology—FIs can gain the ability to turn decision-making into a strategic advantage. Ultimately, this analytics journey enables them to become an insight driven organization—one which entrenches data, analysis and reasoning into the organization’s decision-making processes. The payoff is considerable—empowering organizations to bridge the gap between risk data and business benefits.

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