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Banking

IIF: Banks make slow progress with risk management systems

IIF report suggests it will be years before many banks have adequate risk IT; Only a few have a clear framework for assessing risk appetite

The Institute of International Finance delivered two reports last month that examine the banking industry’s faltering efforts to address the failures that led to the near catastrophe of 2008.

Worryingly, the reports suggest that most international banks are still lagging in their efforts to comply with the best-practice recommendations promulgated by the IIF in 2008 on improving risk IT and operations. It may be another four years before the situation improves and, in the meantime, few banks are capable of properly framing a risk appetite as an integral part of planning what business they should be in and what returns they should aim for.

McKinsey compiled one of the reports, Risk IT and operations: Strengthening capabilities, for the IIF, based on an online questionnaire filled out by 39 firms and in-depth interviews with 10. McKinsey claims it is the most thorough and comprehensive survey on the topic.

"Strengthening risk IT and ops is an important pre-condition for better risk management," points out Philipp Härle, director at McKinsey. He adds: "Most firms believe gaps in best practice still exist in the flexibility of management information systems, in end-to-end data standardization and integrity and in real-time data capabilities."

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