If you haven’t heard enough about risk management within the banking industry, well, that’s a good thing. The more ideas about the discipline and how it can be implemented within the sometimes-risk-loving financial institutions, the better.
On that note, Ernst & Young recently released “CFO Report: Bank Capital Management in Uncertain Times.” The report covers, as stated, capital management strategies, but it also delves into the areas of risk management getting the most attention at global banks. Since the financial crisis, banks recognize that the quantitative risk models many had relied upon are no longer adequate. The survey found that CFOs, chief risk officers and the organizations that they are a part of are coming together to focus on six key areas of risk management:
- Reassessment of business strategy
- Analysis and implementation of capital optimization opportunities
- Monitoring and revision of capital adequacy goals
- Reduction of the complexity of business operations and rationalization of legal entity structure
- Improvements in reporting
- Improvements in data quality and systems
Peter Davis, E&Y’s director of credit risk services, talks about capital management and understanding the risks associated with a new regulatory environment (read: Basel III) in this brief but informative video.