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It seems that risk management is never far from the minds of the boards of financial institutions at the moment, given the increase in regulatory and client scrutiny of this space in the post-financial crisis environment. In order to meet the slew of regulations on the horizon, firms are being compelled to invest in their risk management systems to keep on top of their exposures, be they credit, market or liquidity related.

Regulators such as the UK Financial Services Authority (FSA) are directly endeavouring to place more emphasis on firms’ risk management practices. As well as its liquidity risk reporting regime, the introduction of new remuneration guidelines are aimed at curbing reckless risk taking within financial institutions. All of these are a case in point for increasing the power of the risk function.

Accordingly, the profile of the risk function within financial institutions has gradually risen up the ranks in terms of priority and power, and many more firms are taking the decision to appoint a chief risk officer (CRO). The regulatory community has indicated that CROs should eventually have clear enterprise-wide authority and independence, with tenure and remuneration determined by the board.

However, in order to effectively carry out the risk management function, these CROs need to be able to access the relevant data in as near as possible to real time. This necessarily entails a significant amount of investment to be able to monitor all aspects of risk across a firm’s siloed systems.

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