Risk Mgmt Technology Spending Remains Vital For Banks In APAC

In a survey conducted at the recent Chief Risk Officer forum organised by IDC Financial Insights, delegates were asked if there is a change in their risk technology spending in 2010. Echoing the sentiment that risk is a critical priority not only for the financial safety, solvency, and soundness of a bank but also to comply with enhanced regulatory pressures, 84.6% of the respondents noted an increase in current spending, with a majority (46.2%) indicating an increased in investment.

“The finding suggests that while capital remains of paramount importance, banks are establishing a balance between driving business strategies and enhancing risk controls. Risk management technology spending remains vital, with progressive institutions making intelligent investments to capitalise on market opportunities, leapfrog hesitant competitors, and put them in good stead during the upturn,” said Li-May Chew, CFA, Associate Research Director, IDC Financial Insights APAC.

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The forum, which brought together Chief Risk Officers (CROs) and their deputies from 11 countries across APAC (excluding Japan), also unveiled the key areas that senior risk practitioners from both emerging and developed Asia are currently focused on. They include managing consumer credit risk and how analytics plays a crucial role in this, identity theft and management (predominantly around card fraud), internal fraud management, embedding a risk culture within the bank, compliance documentation and reporting, and the adoption of international best practices in credit risk.

For instance, the delegates pointed out that although merchants in the APAC region are becoming Payment Card Industry Data Security Standard (PCI DSS) compliant and banks are issuing EMV chip cards in a bid to prevent and mitigate identity thefts, the problem remains prevalent for payment cards. Conversations around employee fraud point to the need to establish internal controls coupled with the development of a risk and enforcement culture that stresses accountability and responsibility and reinforces the banks’ tough stance against enterprise fraud.

Delegates were further surveyed to determine if investments on pursuing new business initiatives (such as spend on new product innovation and customer relationship management tools) have taken a backseat to risk mitigation efforts (see Figure 2). Only a minority (30%) completely agreed or agreed with this declaration. 26.7% of the participants were neutral, while 43.3% disagreed that other efforts are less important vis-a-vis risk management undertakings.

“It would be interesting to see how opinions change in future iterations of this survey. However, we suspect that with time, there would be an equal focus on risk and on pursuing new business opportunities, with banks striking a new equilibrium between stronger, more robust risk processes and at the same time, ensuring that potential growth opportunities are not forgone at the expense of risk mitigation,” said Li-May Chew.