4 - Integrating risk management through an enterprise architecture

Abstract

This chapter focuses on developing an integrated risk management system. The aim is to provide a sound platform for further product innovation and risk management functions, and also to serve the bank's dynamic funding activities in conjunction with steady evaluation of economic capital allocation. The best design is characterized by flexibility for renewal and expansion, and effectiveness in the support provided to end users. In a risk management sense, a system solution is considered as integrated if the information it provides satisfies the need that the institution does not ignore any material source of risk, wherever it exists and whichever function it might impact. A well-designed integrated risk management system carries to the appropriate management levels details and aggregation, and qualitative and quantitative risk measures that incorporate multiple types or sources of risk. The effectiveness of deliverables is heavily affected by the end user's perception of ease of use, which is often characterized by (1) seamless links among heterogeneous components, (2) ease of moving between various functions, competency to respond to queries on product offerings, and (3) the ability to make different component parts appear similar to the user. Over recent years, by using high technology, the better-governed financial institutions, and other companies have become increasingly active managers of their capital. The result has been greater sophistication of risk management tools and procedures. Real-time solutions, sophisticated models and a significant change in risk management culture must support these.