What in your view, presents the greatest challenge to risk managers in the risk discovery process?

In the aftermath of the global financial crisis, the role of risk managers and risk function in general has become a far more important aspect of banks’ businesses. The growing diversity of banks’ businesses, sophistication of products, increasingly interconnected and volatile markets, complex organisational structure and technology, as well as growing network of counterparty relationships have all combined to increase the complexity of the risk environment that risk managers face today.

In addition, risk managers have to comply with a growing multitude of reporting requirements, and there is danger that reporting requirements may overtake the function of risk discovery as one of the main functions of risk managers. Complexity is increased by new regulations and compliance requirements, making banks lose the ability to manage their core function of identifying, understanding, and managing risks in a simple manner.

The time when risk managers relied wholly on quantitative models to determine risk exposure is gone. The business of ascertaining risks is no longer straightforward. Increasingly, tools such as scenario planning and stress testing have come to the fore to help banks better assess not just risk but the sustainability and stability of their businesses. In addition to macroeconomic analysis, risk practitioners today consider and plan for myriad event-driven factors in their risk models.

Developments and advancements in technology such as big data analytics now allow even “unstructured” such as inputs from social media to provide insights for risk management. Internal models will become more robust and sophisticated as CROs debate the merits of developing new systems to address the shortcomings of old models that they no longer trust.

In the changing risk management milieu, banks must ask themselves, Are we building the necessary capabilities with the right combination of risk, business, and technology competencies to address these issues?

This consultation is designed to help banks in the Middle East that are currently developing their risk management capabilities to gain insight on how to leverage advanced data analytics and turn the complex mix of data into actionable information for more effective risk management.