Survey: Better risk management would have lessened credit crisis

Data and company culture found to limit enterprise view of risk

CARY, NC – With the current credit crisis triggering more than $400 billion1 in asset write-downs among the financial services industry, enterprise risk management (ERM) programs and components are in high-demand now more than ever to help institutions aggregate risk and treat it holistically. According to a global survey of 316 financial services executives, over 70 percent of respondents believed that the losses stemming from the credit crisis were largely due to failures to address risk management issues.

The results of a global survey conducted in July 2008 by the Economist Intelligence Unit on behalf of SAS, the leader in business intelligence (BI) and analytics, gained insight into enterprise risk management strategies.

Executives now appear to be paying attention, with 59 percent of survey respondents saying the credit crisis has prompted them to scrutinize their risk management practices in greater detail. In anticipation of closer scrutiny from regulators, many institutions are revisiting their risk management practices. In addition, recent reports by the Financial Stability Forum (FSF) and the Institute for International Finance (IIF) are now calling for closer scrutiny of the risk management process.

TowerGroup analyst Rodney Nelsestuen agrees. “Enterprise risk management has taken on new importance as stockholders, boards of directors and regulators demand better, more timely analysis of risk and a deeper understanding of how the institution is impacted by the dynamic risk environment of a global financial community.”2

Survey respondents identified several challenges such as data and company culture, which have affected the implementation of comprehensive risk approaches. For many executives at financial services firms, access to relevant, timely and consistent data is a major obstacle. In addition, almost half of the respondents believed fostering a culture of risk management was the most widely encountered challenge.

Firms participating in the survey are recognizing that successful integrated risk programs go beyond quantitative benefits. In areas such as credit and market risk, an integrated approach can efficiently allocate capital and provide better loss containment; it also serves as a form of protection against a damaged reputation.

“This survey is evidence that the risk management needs of financial institutions are evolving to go beyond regulatory risk and must break down traditional risk silos to drive toward a firm-wide risk view,” said Alastair Sim, Global Director for Risk, SAS.

The findings were unveiled today at the Enterprise Risk Management thought leadership event in London.
SAS® for Enterprise Risk Management

Enterprise risk management entails more than balancing risk and reward, and goes beyond regulatory compliance. It embeds risk management into everyday processes at all levels of the organization in order to truly drive business evolution.

Recently, SAS was placed in the Leaders quadrant of the Magic Quadrant for Operational Risk Management Software for Financial Services 3 by Gartner Inc. SAS repeated its lead position in Chartis Research’s report Credit Risk Management Systems 2008 for retail banking. The momentum for SAS in the operational risk management space was also evidenced by doubling revenue growth in operational risk sales for 2007 and securing the leadership position in Chartis’ Operational Risk Management Systems 2008 for the fourth straight year.

1. Institute of International Finance report on Principles of Conduct and Best Practice Recommendations, July 2008
2. TowerGroup. Back to Basics, Into the Future: Risk Management and Growth Through Enterprise Intelligence. Rodney Nelsestuen, May 26, 2008.
3. Gartner Research. Magic Quadrant for Operational Risk Management Software for Financial Services, Douglas McKibben, David Furlonger, June 6, 2008
About SAS
SAS is the leader in business analytics software and services, and the largest independent vendor in the business intelligence market. With innovative business applications supported by an enterprise intelligence platform, SAS helps 44,000 organisations improve performance and deliver value by making better decisions faster. Since 1976 SAS has been giving customers around the world The Power to Know® .