In a recent American Banker Research survey, 30% of bank executives said they plan to increase spending on risk management technology in 2013. Asked further which types of risk management software they plan to buy, 58% of those bankers said they'll invest in enterprise risk management.
This plays well into the plans of ERM providers such as IBM, SAS and Oracle.
For the past five years, Oracle Financial Services has been building a framework of interoperable analytics applications for specific business areas of banks such as profitability, asset/liability management, liquidity management and compliance. Many of these are part of its enterprise risk management solution.
Today, the company is debuting three new risk modules to the framework that help with Basel III compliance, credit risk reporting, and risk model management.
Basel III calls for better risk assessments of assets and better planning for financial upsets. "Since the financial crisis a broad theme is capital adequacy," says Subramanian Ramakrishnan, group vice president and general manager of financial services analytical applications at Oracle, with some understatement. "That brings a need for strong liquidity testing and adverse stress scenarios every six months." Oracle says its Basel Regulatory Capital software can help banks cope with the leverage ratio, capital adequacy and capital buffer requirements of Basel III.
Basel III also requires banks to manage their risk models, ensure the quality of the data the models use and audit that data. According to Oracle, its Model Risk Management module can identify and help correct poor data quality, the incorrect or inappropriate use of models, design flaws in risk models and unauthorized access to the models.
To meet the asset risk weighting requirements of Basel III, Oracle's new Financial Services Credit Risk Management software is said to provide a single view of portfolio credit risk across an organization, including product types, lines of business, geographies and legal entities, by combining results from multiple sources, including capital adequacy systems, modeling applications and external data. This in theory should help banks be consistent in the way they assess risk across different types of assets.
The overall common analytics framework and data repository Oracle offers, Ramakrishnan argues, provides banks with the ability to conduct accurate, consistent stress tests across all departments (another Basel III-related virtue).
"When you have people from treasury, finance and risk make decisions together, you set up internal collisions," he notes. "Treasury's view of the world will always be different from finance's view."