Riding on risk analytics to create competitive advantage
Guest post by
S L K Prasad Thanikella, Senior Associate Consultant, Business Intelligence - Financial Services Industries, Infosys Limited
Do the following questions ring any bells in your mind?
• What is the expected loss of my portfolio?
• If we lend an additional $100M to a significant obligor, what should be the loan's price?
• If the economy reverts, what will be the impact on the portfolio's loss?
These are typical questions that Financial Risk managers ask themselves frequently. One of the ways the risk function can add value to a Financial Services organization is by quantifying the amount of exposure. It supports Business Units in objectively analyzing, taking informed decisions, minimizing risk and enabling overall profitability over the long term. It is beyond any doubt that top banks consider Financial Risk Management as a key driver of long term profitable growth and sustainability.
Analytical Maturity continuum categorizes global financial services organizations into five categories based on their capabilities to perform analytics in-house:
• Analytically impaired with limited interest in senior management in analytics
• Localized analytics with analytics in silos
• Analytical aspirations with a commitment by senior management to build analytics capability
• Analytical company enterprise analytics as corporate priority
• Analytical competitor, the nirvana stage with ROI on analytics already showing up
For institutes that compete on analytics, it is desirable that they position themselves as analytical companies or analytical competitors. Analytical companies have systems that facilitate features like dash boarding capabilities, drilldown, roll-up, forecasting, hierarchical analysis, guided navigation and Ad hoc analysis.
Before embarking upon the journey to implement a Risk Analytics solution, it is important to understand typical project implementation challenges. Successful execution calls for a three-pronged strategy:
• Expertise in best-in-class principles of financial risk function and regulatory guidelines to perform a fit-gap analysis and propose a holistic solution
• Superior execution capabilities in implementing analytics solutions to organizations of comparable size
• Deep knowledge in technology that is leveraged to build a system that has features like scalability, robustness besides user engagement
Oracle offers a solution through an integrated suite of applications called Oracle Financial Services Analytical Applications (OFSAA). The OFSAA suite has several analytics modules like Retail Credit Risk Analytics (RCRA), BASEL II Analytics which create business value by converting raw data into actionable intelligence. OFSAA helps organizations build analytical capabilities on the foundation of Universal Data Model and a comprehensive Staging Layer. It Integrates forecasting, provides ways to alternative data sourcing, helps in optimization of data to be analyzed. It brings to the table, a robust framework that is built based on best-in-class principles of financial risk and performance management which leverage the strong Oracle technology base. It offers an excellent platform for Banking and Financial Services Organizations to build an integrated Risk, Finance, Treasury and Customer Repository of data. It reduces time to respond to regulatory authorities with pre-built standard reports which refresh automatically periodically.
OFSAA Analytics is a closed loop solution that enables timely compliance reporting, data-driven decision making, and user engagement - thus helping organizations achieve competitive advantage.