Removing the need for Risk & Finance reconciliation Most banks have separate groups responsible for the financial accounting and the general ledger versus market, liquidity and credit risk calculations and disclosures. In many cases these two groups get their (overlapping) data through different routes, and have different sign-off/adjustment processes. Consequently there is a huge operational effort to perform the monthly reconciliation between the two datasets.
The way to resolve this is to implement a single source of data for the two separate groups, utilising a single Risk and Finance data warehouse. To resolve the issue successfully, strong data management practices need to be implemented in conjunction with the new data warehouse. In addition, banks need well-managed transaction data and solid underpinning reference data. Increasing transparency while reducing risk Due to the large amount of product innovation and acquisitions activity over the past decade, many banks have been left with a complex web of interfaces into Finance. This makes the systems very expensive to maintain and change, and requires the Finance team to investigate breaks rather than doing value add analysis.
Reducing reliance on a large number of legacy up-stream systems, and implementing a single down-stream Risk & Finance data warehouse would allow banks to access information quickly and obtain detailed insight from this data. Coupled with strong data management, banks would be able to respond to increasing regulatory pressure to be able to track data back to the source and prove consistency between reports. Increased workforce engagement in meeting regulatory requirements With RWA becoming the scarce resource, it will likely become unacceptable for banks to only have a view of their official RWA numbers 4-6 weeks in arrears. They will need it daily. Reduced re-engineering efforts with sourcing data straight through would allow banks to move to daily P&L & RWA calculations. In addition, the workforce would become empowered to deliver value-add activities.
By addressing these issues banks will be able to initiate cost take out, reduce manual involvement (and hence talent consumption), and increase pace, accuracy and consistency of information for decision makers. Any bank not addressing these issues will find the collective pressures will make their financial reporting too slow and inaccurate in this fast-paced environment.