John Byrne of Information Mosaic, the world’s most trusted software company, warns banks to use Key Performance Indicators (KPI) and Key Risk Indicators (KRI) driven predictive analytics to capture and analyse operational data to prevent the billion pound loses previously seen. He encourages the use of greater analytics to capture and analyse operational data as it happens to give managers the information they need to intervene before a risk becomes a loss.
Operational risk represents a real and tangible threat to banks and capital markets. John notes during his speech at the European Clearing and Settlement Conference in London that most of the losses associated with operational risks are preventable, but the current means for capturing the data needed to monitor risk is not adequate. Post trade predictive analytics can be used to capture, intervene and prevent errors from occurring.
In 2011, the 65 member banks of the Operational Risk Exchange Association (ORX) reported cumulative losses of €25.1Bn; the result of 36,258 errors. Over the five years the ORX has been keeping such records, there have been 197,760 losses reported for a total loss amount of €81.5Bn. And consider that this is just 65 banks reporting – a fraction of the world’s financial services providers practicing today.
John Byrne, CEO and Founder of Information Mosaic, commented, “Banks accumulate significant operational risk losses each year, as much as 3% of gross income in some cases, but the real risk to these institutions may well be to their reputation. Information Mosaic’s analytic based product, IMValue™, uses KPI and KRI driven predictive analytics to capture and analyse operational data as it happens and give managers the information they need to intervene before a risk becomes a loss.”
“By using greater analytics to capture, intervene and prevent errors the benefits will not only be reflected in service efficiency, service quality, regulatory compliance and reputational risk, but also increased capital costs and lower liquidity.”
The European Clearing and Settlement Conference is taking place in London 25-26th June 2013.