A look back on Risk trends 2012 vs 2013

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A look back on Risk trends 2012 vs 2013

PRMIA and SunGard joined forces one year ago to project forward trends in risk management, risk technology and regulation’s impact on the practice of risk management.  While many of the findings in this report have yet to be fully realized the trends may be informative for 2013 and beyond given the rapid changes taking place globally.

The top three risks listed for 2012 included the ability to demonstrate the value of risk management, new regulations, and liquidity risk.  Interestingly the report accurately predicted the rise in commodity prices and risky asset classes which we saw begin in late 2012 and continue through 2013’s market rally. 

However, the jury is still out on other predictions by the respondents.  For example, close to 90% of respondents predicted that risk management will play an increasingly important role while almost 80% suggested that risk management will be a driving in bringing new assets to their firm. 

Additionally, and not surprisingly regulatory change was cited as playing a major role impacting risk managers while risk technology was expected to make positive contributions to risk practice through better reporting and more timely market data.  The single biggest prediction suggested that the organizations would adopt improved risk cultures at their firms including a well-defined risk appetite. 

Clearly, many of these findings were optimistic and aspirational in nature and the results are vague with some examples of specifics yet the data may provide guidance for improved progress being made and risk management and a recognition of the additional changes needing to take place. 

The PRMIA report noted that risk reporting has penetrated the C suite with 27% reporting senior management review risk reporting while another 27% of corporate boards are consumers of risk reporting.  Regulators, Fund managers, and investors all came in at 15% or higher rounding out the end users of risk reporting which is an improvement over the past few years.

Finally, the survey asked for a single factor to improve risk management. The top responses included:

  • Better risk culture  –  31%
  • Better defined risk appetite  –  19%
  • Flexible risk reporting  –  18%
  • Faster risk reporting  –  10%
  • Extended asset coverage in risk system  –  8%
  • More timely market data  –  5%

One third of respondents preferred cloud-based technology solutions with nearly two-thirds preferring home grown solutions due to concerns around security, slowed data processing, and a preference to store confidential data in-house.

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