13 December 2004

ORM: Systems Integration Challenges

In Deloitte's 2004 Risk Management Survey more than half of the respondents say integration of systems to handle Operational Risk is a big concern. More Chief Risk Officers (CRO)have been hired and are reporting directly to the CEO or the Board of Directors.

Operational risk management - according to the survey, operational risk management (ORM) continues to be a relatively new and developing field compared to the more established risk management disciplines, with the majority of respondents still in the beginning stages of implementation. However, the survey shows an increase over 2002 in the number of firms that have established ORM programs. The capability of ORM systems continues to be a challenge for a substantial majority of respondents who indicated that at least some improvement in functionality is needed.

Risk systems and technology - while information technology is considered to be the key enabler of a risk management architecture, respondents report a host of continuing challenges in developing adequate risk systems. More than half (52 percent) cited a lack of integration among systems as a major concern and 42 percent cited it as a minor concern. Lack of flexibility and scalability as well as performance issues were also noted as key challenges. Improving regulatory related systems capabilities and implementing operational risk management and advanced credit risk systems were the three highest priority items cited by respondents in the systems development and technology area.

"Financial institutions are recognizing the need for strong risk management governance, now more than ever," said Jack Ribeiro, managing partner of Deloitte's Global Financial Services Industry practice. "They are responding to increased expectations from regulators, counterparties, the public, and others to ensure sound governance of their risk management programs."

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