"We believe the future of banking and financial institutions is inextricably linked to their successful harnessing of risk management," she continues. "We see risk management moving away from a specialist role and assuming a wider, integral role in the management processes of all financial institutions."
Joanne Shun explains, "The key underlying trend is that progressive financial institutions are starting to see risk bearing as a profit generating activity, and risk capacity as a resource to be effectively utilised. Risk management is no longer only about control or providing a ‘safety net’ for the institution, but is now starting to drive business decisions and underpin good management practices in all types of financial institutions. Increasingly, banks want to measure returns on a risk-adjusted basis, and allocate capital to their business areas based on these risk-adjusted figures. Risk management is no longer a passive, constraining separate function, but is assuming an active and central role in the overall management of financial institutions."
The Risk-to-Value strategy builds on the observation that this trend is steadily gaining greater importance. The emphasis on the measurement and management of risk-adjusted return on capital or equity (RAROC) is now something that is well established across the financial industry. The fact that it is not yet well implemented in banking speaks for the relative lack of suitable integrated risk measurement systems.
Joanne Shun goes on to say, "Besides the internal use of risk adjusted performance measures such as RAROC for economic capital, the influence of the regulators will continue to drive institutions to more efficient measurement of regulatory capital. There will be a need to allocate regulatory capital against risks other than market and credit, such as liquidity, legal, business and operational risk; therefore banks whose risk systems are seamlessly integrated with their operational systems will benefit most."
She points out that "With the recent unveiling of Risk Vision Release 5, Misys is exceptionally well placed to move rapidly into this future vision for risk management. We believe that we are the first supplier to provide a totally integrated risk management solution which today delivers comprehensive support for enterprise-wide credit, market and liquidity risk management, together with global limits management."
Joanne Shun predicts that "more and more of the balance sheet of financial institutions will come under the umbrella of risk management. Eventually, this will lead to risk management taking over the role of Asset and Liability Management. We will be able to see distributions of income, expenses, capital, equity, Return on Equity (ROE) or Return on Capital (ROC). We will also be able to test the impact on these central results from different strategic decisions about not only risk bearing but also about portfolio structuring, market and product strategy, product pricing, and many of the major decisions of corporate management."
She sums up by saying, "Misys is ideally positioned to meet this future challenge for risk management. We have a portfolio of flexible powerful and advanced components, which are already integrated to provide a full range of support for risk across all areas of a financial institution. Substantial and continuing investment in our risk products, together with our global architecture, ensures that we will continue to provide market-leading solutions to meet the future of risk management."