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The Accenture 2012 Risk Analytics Study set out to assess the support for, and maturity of, risk analytics technologies, tools, processes and talent across several industries, including banking.
Support is strong for analytics as a means to mitigate risks more effectively, though the patterns of responses from those surveyed show that the risk analytics field is, in many respects, still in its infancy in terms of its practical implementations across these industries.
Companies are investing in risk analytics and intend to increase those investments, yet the potential return is often stifled by inconsistent or incomplete data. This prevents organizations from generating the insights needed to support a more predictive approach to risk management.
Although the field of analytics has not yet reached full maturity, it has been around long enough that it is fair to ask how effective such solutions are in making a difference to corporate performance—especially when it comes to managing and mitigating risks.
The 2012 Risk Analytics Study—conducted by Accenture Risk Management—is based on a survey of 465 managers and executives from all major geographic regions. Respondents were from the banking, insurance and chemicals industries and all held corporate positions in which they were responsible for developing or utilizing industry-specific analytics capabilities.
The purpose of the study was to assess the relative maturity of risk analytics methods, tools, technologies and processes; to determine their current effectiveness in driving business, customer and market insights to support better decision making; and to identify current trends.
Among the industries studied, banking is predicting the greatest increase in risk analytics investments, with 73 percent expecting a rise of more than 10 percent. In terms of specific capabilities, risk analytics spending is expected to increase most in areas of data quality and sourcing, systems integration and modeling.
Regulation, growth and expansion are the main drivers for the take-up of risk analytics in banking.
Within banking, the focus of risk analytics is especially on credit risk. Half of all banks’ IT departments have an organized process to collect data from legacy systems into a certified data warehouse.
Forty-two percent of banks calculate risk indicators by collecting data from the execution environment that feeds monitoring dashboards.
Better modeling is a critical component of credit risk analytics, with European banks more likely to use only internal models (18 percent versus 13 percent globally), while Chinese banks are more likely to use only external models (14 percent versus 7 percent globally).
Most banks have a dedicated risk analytics group with between one and 20 people deployed.
Eighty-five percent of banks have a risk analytics group for credit risk validation.
Significant majorities of banks across all regions have quality controls in place over the collection of historical data. ASEAN institutions are most likely to do so at 85 percent, and Europe is least likely, at 64 percent.
More than three-quarters (77 percent) of banks across all regions use stress-testing regularly to verify capital adequacy.
The industries studied vary widely in their business challenges and strategic goals, so risk analytics takes different forms across the different companies. However, based on analysis of the data, Accenture has identified five common trends across the industries studied.
Investments in risk analytics are increasing and executives expect ongoing developments in this area.
The maturity of risk analytics is uneven across essential capabilities and functions, so the value being achieved is not yet robust.
Data consistency is a significant challenge.
Risk analytics is currently more preventive and reactive than predictive.
Lack of expertise in risk analytics looms as an important challenge.
Risk analytics is increasingly important for banks as they cope with a complex regulatory and competitive environment.
Important technologies and calculation engines are now available that are critically important to the future of banks and the entire industry. At the same time, it is possible to develop an over-reliance on analytics, so a balance needs to be found.
Developing more comprehensive and integrated capabilities is increasingly important. Integrated stress-testing, for example, is an important means by which the science of risk management can be turned into more of an art, such that it can be communicated and appreciated by a wider audience. An effective stress-testing framework encompasses a wider spectrum of macro-economic, social, political and environmental considerations and forecasts and so can help banks avoid the tunnel vision that can prevent them from making good decisions and taking timely action.
The Accenture 2012 Risk Analytics Study underscores the commitment banks have to improve their analytics technologies, tools and teams. At the same time, it highlights the challenges banks face—particularly in the areas of skills and integrated approaches—that need to be addressed before risk analytics becomes a mature capability.
June 29, 2012
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