Is your bank a Risk Management Leader?

“A large bank like Wells Fargo has large amounts of data, and there are exponentially different ways in which trends or patterns could present themselves that may provide valuable insights for effective risk management. Today, we have the ability to process that data in a much more efficient and effective way.”

Mandy Norton, Chief Risk Officer, Wells Fargo

A new global survey

A new global survey by SAS in partnership with Longitude (a Financial Times company) of 300 senior banking executives reveals a group of banks that are leading the way in delivering a more integrated, digitalized approach to risk management.

We call these banks the Risk Management Leaders, and their investment in automation is paying off.

They are also more likely to report better performance in other areas:

  • Greater integration between regulatory activities and business planning activities
  • Increased ability to project balance sheets three or more years ahead
  • More accurate forecasting
  • The ability to run stress tests and scenario analyses more frequently
“The benefits of automation are immense. It is much more meaningful for us – not just in terms of delivering the Bank of England stress tests, but for managing our business.”

Mark Smith, Group Chief Risk Officer, Standard Chartered Bank

Who are the Risk Management Leaders?

The Risk Management Leaders are a group of banks – 20% of the survey respondents – that have:

1. Automated risk modeling either a lot or completely, and

2. Adopted the following tools to some extent:

  • Integrated balance-sheet management
  • Scenario-based risk analytics platforms
  • Modeling-as-a-service
  • Enterprise-wide data analytics platforms
  • Real-time risk management.

The Risk Management Leaders are further ahead in automating many parts of their banks’ operations

“Clients want a fully digitalized process where they can do everything online, including applications for credit.”

Sadia Ricke, Group Chief Risk Officer, Société Générale

Risk Management Leaders are also more likely to say they are planning to increase their investment in critical aspects of risk management in 2021

(Chart shows % banks that say they plan to increase or significantly increase their investment in each area)

How the Risk Management Leaders are getting ahead

Their digital maturity allows these banks to outperform their peers.

1. They see greater benefits from automated risk modeling

  • 55% of Risk Management Leaders report increased speed compared with just 42% of the banks overall
  • 43% of Risk Management Leaders report improved compliance compared with just 32% of the banks overall

What benefits have you seen from automating risk modeling?

2. Their risk management and business planning are more integrated

  • 78% of Risk Management Leaders say that their bank has already integrated regulatory stress-testing exercises with business-planning exercises, compared with 45% of the banks overall

3. Their business forecasting is more accurate

  • 37% of Risk Management Leaders rate the accuracy of their projected balance sheets as “very high,” compared with 14% of the banks overall

4. They can project balance sheets further into the future

  • 44% of Risk Management Leaders can project balance sheets three or more years ahead, compared with 19% of the banks overall

The Risk Management Leaders can forecast further ahead and with greater accuracy

Also Risk Management Leaders are far more likely than the banks overall to say that their risk-modeling processes offer them a competitive advantage.

"Our risk modeling processes are a competitive advantage."

Chart shows % who agree/strongly agree

“We can process so much more information in much more efficient and effective ways with these technologies. It is really becoming very useful.”

Mandy Norton, Chief Risk Officer, Wells Fargo

How other banks can catch up with the Risk Management Leaders


Standardize and modernize risk modeling

To build, deploy, and monitor models at speed and scale, you need to modernize your risk-modeling lifecycle.

For many, this will require a standard framework for the development and application of regulatory and managerial models across the institution. This should guarantee easy application of both common and advanced analytics while aligning with regulatory and internal governance.

Centralized model repositories, automated documentation and real-time monitoring can reduce the time it takes to deploy a model for batch and online applications from a few months to a few weeks – a critical difference in today’s fast-changing marketplace.

“There are a lot of challenges to work through, but the evolving technologies and models are helping us get there, and I think that is exciting.”

Mandy Norton, Chief Risk Officer, Wells Fargo

“Moving from legacy systems to cloud-based platforms enables banks to deal with a lot more data in quicker and more responsive ways.”

Mark Smith, Group Chief Risk Officer, Standard Chartered Bank


Invest in cloud infrastructure and automation

Banks must ensure they have the right infrastructure to consolidate and analyze increasingly large sets of data faster.

Cloud platforms are enabling technologies – not an end in themselves. Containers, microservices and APIs and scalable computing are powerful, but you have to combine them with flexible operating processes.


Focus on quick wins – not large-scale transformation

For many banks, large-scale transformation of risk-management processes is too potentially disruptive.

So identify areas where modernization can deliver the greatest value, and pilot lower-risk projects such as early warning systems, model monitoring, credit collection and fraud risk detection – then use the results to guide further transformation.

“We have the most incredible computing power to process billions of pieces of data. It is exciting to think about how we can use this to be more relevant, timely, and responsive to our customers.”

Mandy Norton, Chief Risk Officer, Wells Fargo

“A more automated approach gives you the ability to be more effective from a business perspective.”

Sadia Ricke, Group Chief Risk Officer, Société Générale


Integrate risk management with business-planning activities

The value of risk management is amplified when it is integrated with business-planning activities, such as forecasting.

You can do this with data analytics platforms and integrated balance-sheet management, and the research shows that many banks plan to invest in these technologies.


Invest in talent – and develop it

Investing in the right skills and capabilities will be vital for stronger risk management. But finding the right combination of skills can be challenging.

So hire candidates with individual ‘quant’, digital, and data analytics skills, then provide training to fill any gaps. And give high-level risk and technology training to the entire organization.

Our focus going forwards is data analytics. No question about it. Everything we do has to be driven by data analytics.”

Dr Han Hwee Chong, Chief Risk Officer for RHB Banking Group

Find out how banks in your region compare to the leaders


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