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As banks seek to return to profitability after the recent financial crisis, their ability to manage risk strategically is what will set them apart. However, envisioning and then instilling a risk culture is challenging. Accenture has developed a model to help banks introduce and integrate effective risk management strategies across the enterprise for sustainable value creation and growth as they pursue high performance.
The financial crisis saw risk management gain increasing acceptance as more than simply a necessary evil. Rather, in a marketplace where sustainable sources of competitive advantage are hard to find, effective risk management is being increasingly viewed as a key determinant of a bank’s ability to compete successfully. To achieve high performance, intelligent and proactive risk management must become part of the way a bank does business. Risk management capabilities need to be focused on the issues that matter to the business and leadership—with the function seen as a partner in delivering the objectives of the organization at multiple levels.
The collective impact of regulatory trends and the credit crisis has had a profound impact on banks’ profitability. Looking ahead, banks must plot a route to generate a return on equity (ROE) of approximately 15% in order to attract capital and remain viable as commercial enterprises. Rebuilding profitability can be addressed through certain key imperatives for growth. At the heart of this rebuilding is a strategic approach to risk management that covers effective integration across risk types and business units as well as improved credit risk practices.
Predicting the impact of future technology or discerning whether the economy will double dip or stagnate is extremely hard. However, actively assessing how your business model could adapt to differing scenarios must form part of your ongoing risk management in the future. The risk team needs to be proactively engaged in the strategic responses to uncertain conditions and in further integrating risk capabilities within organizations.
Accenture advises asking the following questions to help ascertain the challenges in adopting a risk-centric model:
Contact us to find out how Accenture can help your bank develop a risk management strategy that enables high performance.
Steve Culp is the managing director–Accenture Risk Management. Based in London, Culp has 20 years of global experience in strategy definition, risk management, enterprise performance management and delivering large-scale finance operations engagements. Prior to his current role, Culp was the global lead for Accenture’s Finance & Performance Management consulting services for global banking, insurance and capital markets institutions. With his extensive risk management and performance management experience and business acumen, he guides executives and their teams on the journey to becoming high-performance businesses.
Peter Beardshaw is executive director–Accenture Risk Management. Based in London, Beardshaw brings more than 15 years of deep experience in delivering target operating models and business process redesign initiatives within the credit risk and capital management areas. His broad experience in investment banking program management and change management, in addition to his technical experience in multiple asset classes across front, middle and back office, helps organizations become high-performance businesses.
February 9, 2011
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