One significant advantage of living in the information age is that much of the information that professionals require is easily accessible via multiple sources on the internet. Things become more complicated when we discuss risk information for risk managers in banks, because risk information is frequently not readily available. The information and data that bankers require are available, but they are frequently dispersed across multiple documents and spreadsheets from various sources. Compiling all available data and transforming it into actionable intelligence is a mammoth task for risk management in a bank.
This is a significant issue not just for banks, but for the entire economy. Banks are not simply profit-generating enterprises; they play a critical role in the local and national economies. Banks provide critical services to other businesses; some businesses would be unable to operate without bank services. Banks also provide credit and capital to local businesses in times of need. When a bank suffers a significant loss, the loss is not borne solely by the bank; its effects are felt throughout the economy.
The Risk Data Conundrum
The majority of risk managers ensure that their bank is protected from significant risks by poring over numerous data sources to create risk assessments. The issue is that much of this data is dispersed across multiple documents in disparate formats. Bankers must first collect all documents and spreadsheets containing critical data, extract the critical data, standardize the data for analysis, and then transform the data into actionable intelligence.
There are several drawbacks to this strategy. The most obvious reason is that this data is critical, yet so many risk managers struggle to obtain it. That is not, however, the only disadvantage of performing this task manually. What makes matters worse is that by the time this analysis is complete, the data is frequently out of date. Numerous market-related metrics are subject to rapid change – what good is a report that took two days to complete if many of the data points contained within it are no longer accurate?
Inaccessibility Results in Ignorance
The effort required to extract actionable risk intelligence from risk data is frequently insurmountable for smaller banks. Managers frequently make decisions without consulting data first, as data is frequently unavailable. The only way to ensure that the bank’s executive decisions are informed by the most recent intelligence is to make the data easily accessible. Risk intelligence should be easily accessible to all stakeholders, allowing them to consult it as needed.
This is one of the most significant and profound benefits of modern risk technology. Risk managers who previously had to develop their own intelligence now discover that they can obtain the data necessary to make sound decisions with a single click on a dashboard within their new risk management system. This means that instead of first determining the nature of the problem and analyzing various data points, risk managers can immediately access the most up-to-date risk metrics and intelligence. Rather than scavenging data from multiple sources, they are provided with it in a single click.
Risk Information as a Competitive Differentiator
Providing current risk intelligence to the board and risk team has additional benefits beyond protecting the bank; it can also serve as a competitive advantage. If a bank has real-time metrics and makes decisions based on the most current intelligence, it can outperform the competition and prepare for impending changes faster than the competition. What’s critical to understand is that risk intelligence does more than assist banks in identifying risks; the same technology also assists banks in identifying opportunities.
Every bank is concerned about risks that are becoming more severe or probable, but the flip side is just as critical. While a risk’s severity or probability decreasing may not seem like something a risk manager should be concerned about, it can represent an excellent opportunity for a bank. When a risk is reduced, new opportunities become available in its place. This may enable a bank to expand more quickly than anticipated, or to invest in an area that previously appeared too risky to be a good investment. Having access to such information ahead of the competition enables a bank to benefit from a competitive advantage.
At the end of the day, risk managers can only make decisions based on the data they have access to. That is why technology makes them so much more capable and useful for businesses; it provides them with real-time data that is accurate, ensuring that their decisions are based on the best possible business intelligence available.