Sapient has announced the release of a new white paper entitled “Enterprise-Wide, Cross-Asset Risk Management Takes Charge: Convergence, Consolidation and Connectivity Pave the Way,” in which Sapient, working with research and publishing company A-Team Group, provides insight into the challenges of enterprise risk management for large and diverse organisations. The Three Cs spelled out in the paper—convergence, consolidation and connectivity—help guide trading and investment firms on how to move to the proactive risk model that will be required in the future.
“Financial services firms have systems in place that lack the transparency and agility needed to understand, report and optimise the risks in their portfolios on a firm-wide basis,” said Chip Register, senior vice president and managing director of Sapient’s global Trading and Risk Management (TRM) Practice. “A critical first step in defining and implementing an enterprise risk management infrastructure is a bottom-up systematic review of risk processes, policies and systems—from C-level, to trading, to operations.”
The unprecedented events impacting global financial markets in recent months have underscored the need for firms to review their current practices and develop an enterprise vision for risk management as a business imperative. Adding to the complexity, firms today are struggling to keep their risk management systems relevant to the rapid innovation occurring in their front office businesses amid increasing global market pressures. At the same time, financial services firms must cope with additional regulatory requirements looming on the horizon.
“There’s no question firms are taking a hard look at risk management practices across the board. They are looking to refine risk measures, improve supporting data and ensure consistent practices as top priorities. The bottom line is that firms are trying to develop roadmaps to achieve risk management goals,” said Angela Wilbraham, chief executive officer, A-Team Group.
In this white paper, Sapient outlines the “Three Cs” of enterprise risk management—convergence, consolidation and connectivity—and describes how by following this approach, organisations will be able to better manage risk at the enterprise level:
• Convergence – The recent economic crisis is forcing governments worldwide to converge on the shared goal of stabilising global financial markets. This environment is setting the stage for agreement across entities on a direction and on defining specific treaties and policies. Organisations should leverage opportunities for convergence, such as industry standards, best practices and utilities, to mitigate risk at both an industry and a firm level.
• Consolidation – Consolidation occurs within the convergence process through bounded centralisation—e.g., merger activity at a financial services level. Consolidation at the enterprise and corporate level aims to bring efficiency gains and to facilitate globalisation. Organisations should use consolidation to enforce and simplify risk management by creating a unified environment, common compliance mechanisms and flexible reporting capabilities.
• Connectivity – Connectivity defines how consolidation happens at policy, process and technology levels. It is the enabling technology that makes convergence and consolidation possible. Organisations should build upon their firm’s infrastructure foundation using a cost-effective approach that increases flexibility, performance and scalability as risk management functionalities.
The white paper – the first in a series jointly written by Sapient and A-Team Group – presents both firms’ knowledge of the complexity facing industry participants, reviews applicable regulations and uses Sapient’s experience working with global businesses to help companies arrive at an executable roadmap.