It is possible that, in the next five years, the risk management function will move beyond being a cost centre to become a value-added component within the financial services sector, according to Neil Dodgson, global head of tech sales, risk and compliance at IBM Watson Financial Services.
Dodgson predicts that risk management will serve as a value-added support tool for various front-office business, including asset management and loans.
“Risk management can change its mission from making sure the firm doesn’t lose money to helping the firm make money,” he says, adding that the single biggest shift in the risk management space over the past five years has been the move from quantitative to qualitative analysis.
Other trends that Dodgson highlights within risk management include:
- Cloud computing. Five years ago, there were concerns over its security with some countries not even allowing it to be used; today those concerns are no longer applicable.
- Big data. By taking the analytics to the data instead of the other way around, the speed of processing has been improved by a factor in the hundreds.
- Cognitive/artificial intelligence. This phenomenon will allow financial institutions to do a much better job of scenario creation when stress-testing.
- Aggregation. Financial firms are now able to use a lot more data – structured and unstructured – much more acutely. Gone are the days of static reports that are out of date as soon as they’re produced, only to be replaced by more live analysis using live production data.