Danny Baker Jun 12, 2013

Risk Management and Performance Analysis in the Cloud

Over the last few years, risk management has steadily ballooned into a highly complicated process for financial institutions of all sizes. Successfully integrating this critical business and compliance need with financial performance analysis has become an industry-wide challenge.

An integrated cloud-based platform can help banks deliver enterprise performance management capabilities by combining real-time, accurate financial data with risk, budgeting and reporting processes. Banks that turn to a hosted cloud-based offering will find it easier to keep pace with evolving regulatory mandates as well as the challenges of managing net-interest margins and revenue growth pressures.

Portal Need

Financial institutions require efficient processing of multiple forecasting scenarios and significant transaction volumes. A solution that offers all this must be easy to use, yet not cost-prohibitive. The need, therefore, is for a portal that addresses the varied challenges and requirements banks face today, and makes it easier for users to switch between multiple applications to run and manage their risk, budgeting, financial accounting and reporting processes.

Banks today require more than just efficient and holistic reporting tools to grow. They need the information delivered in a way that connects the past and present to the future. For example, customer-focused behavioral analytics can be used to model transaction patterns and predict buying behavior, enabling the bank to identify and execute on growth plans through specific customer service strategies. A bank must also be able to simulate its projected growth under various market conditions so that management can adapt to changes to its balance sheet, profit structure and the underlying risks.

The solution that addresses this need is an integrated application service provider (ASP) that marries budget planning, financial accounting, risk management and reporting tools. This solution should also be capable of generating full balance sheet and income statement projections, along with comprehensive risk management analysis for more accurate and efficient budget planning and execution.

Banks are looking at their internal processes more closely than ever before because of declining margins and revenues. There is pressure to monitor performance and achieve better results faster. Enterprise performance management – the overarching business management discipline that frames the condition, prospects and risks facing financial institutions of all sizes – aims to improve each bank’s business performance and ensure the successful execution of its business strategy.

Enterprise performance management helps address the primary concern facing banks: how to protect value while simultaneously growing profits. Protecting assets is another name for managing risk and a certain amount of risk is inherent in sustaining and growing a business. Banks can use enterprise performance management to weigh various decisions that affect the overall business: How can consumer loan profitability grow in alignment with the bank’s risk appetite? What are the best business strategies for dealing with the impact of continued low short-term interest rates? Should the marketing strategy be shifted to focus on expanding customer “share of wallet?”

Cloud portals are particularly effective for expediting the delivery of financial information, addressing the need for collaboration within the bank regarding risk and financial management processes, and facilitating associated business decisions. An integrated cloud-based portal supports the enterprise performance management perspective, enabling the convergence of traditional risk management and performance analysis. Furthermore, a portal provides the management team with detailed insight and analysis in real time, vital to continually updating plans in light of changing business conditions. A key differentiator for banks looking to grow is the ability to unify strategic decision-making and operational execution of enterprise performance management in a dynamic, interactive and adaptive way.

Changes in the financial services industry are driving the ongoing convergence of risk, budgeting, reporting and accounting and influencing banks large and small. As a result of recent advances in cloud technology, banks can now seamlessly integrate risk management, budgeting analysis and reporting management tools that will facilitate the achievement of institutional goals. Banks that embrace cloud technology will have the tools to ensure and improve compliance, grow their revenue and customer base, and be better positioned to weather market volatility and harness emerging opportunities.

Mr. Baker is vice president for product management, Risk & Compliance, at Brookfield, Wisc.-based Fiserv. He can be reached at danny.baker@fiserv.com.

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