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Risk and Reward: Enterprise Risk Management Technology

Enterprise risk management is as much about a bank's culture as it is about specific technology deployments.

Traditionally thought of as a negative, risk is an unavoidable part of doing business. And risk management has been around as long as people have conducted business transactions. But, experts say, the time has come for banks to change their views on risk.

"Risk is not something bad -- it's something that has a price tag," says Wolfgang Porada, global head of sales consulting, risk, for London-based Misys Banking Systems. "If you can earn money on taking risk, you take the risk," he adds. "You take the risk if you get the right reward."

And the rewards can be significant. "The more risk you have, the more money you can make," says Jonathan Rosenoer, global risk officer, financial services sector, for IBM (Armonk, N.Y.).

Yet, managing risk at banks tends to be duplicative and fragmented, which is expensive and inefficient. Even as the concept of enterprise risk management (ERM) becomes more widely accepted across the industry, many banks still are creating new silos of analytical capability, ending up with a potential hodgepodge of different solutions -- each of which may be high in quality but lack the capability to interact with other solutions to provide a true view of risk across the enterprise. >>

Still, to transfrom risk into opportunity, banks increasingly are turning to ERM. "As banks refine their systems and models, the benefits will come from freed-up capacity to take on risk, which creates the ability to embark on new business opportunities," says Brendan Nedzi, managing director at New York-based The Bank of New York ($108 billion in assets).

Sidebar: Basel II Drives ERM

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