The biggest hurdle to breaking down silos “is organizational in nature,” according to Amit Gupta, Partner in Risk Management Practice at the consulting firm Accenture. “The heads of Risk, Finance, Operations are all different people and this introduces a level of complexity.” However, “organizational interconnection at high levels is starting to happen.” Gupta was the third panellist to weigh in at the GARP webinar on May 21, 2013 on how new financial regulations (Dodd-Frank and Basel III) are breaking down silos in risk management.
Regulators are pushing for greater consistency in reporting. As an example, Gupta pointed to new requirements for global systemically important banks (G-SIBs) that require aggregation and reporting for 80-odd items in a self-assessment questionnaire. “Regulators are finding significant differences,” he noted, and this is reflected in the audit.
The financial industry is at the early stages of integration, Gupta said. Besides credit risk—market risk integration, he noted there is “dialog” between groups responsible for credit valuation adjustment (CVA) and credit risk, and between prime brokerage and market risk. “There is also front-to-back integration between front-office and market risk,” he observed.
It’s becoming more complicated to respond to regulations and at the same time, cost pressures exist. “The money spent on Risk and Finance [departments] cuts into profitability,” he said, so it is important to optimize. Particularly for bank mergers, “there’s a massive integration effort” to integrate new acquisitions. “As people build futuristic solutions, they must keep [the possibility of] merging in mind,” said Gupta.
When it comes to technological solutions, Gupta said there is not a single answer. Some institutions with architecture already in place are using technology to connect silos. Others are “building brand new integrated solutions.” ª
The webinar presentation slides can be found at: http://event.on24.com/r.htm?e=614560&s=1&k=D493202F85CBF2098C216D611906019B>