By Azlina Wetmore, Head of Commercial Credit Policy & Innovation, Capital One.
Azlina, can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?
The industry has undergone many changes in the past two decades and I have been fortunate to experience it through different lenses and geographical locations. Legal analyst in the UK during the establishment of the Prudential Regulation Authority, regulator and trade negotiator in Malaysia, dealing with the aftermath of the Asian Crisis- followed by a long tenure in a Swiss American Bank as it expanded its footprint in Asia. It was during that time that I was provided the opportunity to run significant change programs and eventually led to the transfer to Risk Management in the US. Since then I have got very familiar with the Dodd Frank and heavily involved in Risk Governance, first for Operational Risk and then Enterprise as a whole. Last year I joined Capital One to Head the Commercial Credit Policy & Innovation team and the adventure continues.
You will be speaking at the upcoming Risk Americas 2018 to discuss data connectivity across business lines and bringing lines together. Why is this a key talking point in the industry right now?
Data has been a discussion point for some years now. A key lesson learned from the global financial crisis that occurred a decade ago was that financial institutions’ IT and system architecture were not adequate to capture data, aggregate risk exposures and identify concentrations quickly and accurately across business lines as well as between legal entities. Since then, most banks have invested significantly in building the infrastructure however challenges remain -e.g. how to ensure data integrity and clean lineage when the information is sourced from many different systems? When to allow human intervention and how are these controlled and documented? How quickly can the information be obtained, cleansed and analysed and what information should be provided to senior management and the Board to enable them to make better decisions? Added to this, we are living an era where there is abundance of data, so how do we sift through the noise to focus on the signals and trends that really matter? How do we overlay the qualitative experience and judgment over the mined data so that the narrative stands out?
What are the key considerations that need to be made when centralizing data storage, format and collection?
In my experience, there are three areas which will make a difference. First, it is really important to nail the data taxonomies including characteristics of the data, terminology and naming conventions. Secondly, there must be a clear call out on roles and responsibilities so that all parties know what they are accountable for and the necessary controls they need to put in place to mitigate any risks. Finally, the breaking down of silos – data and human – to ensure shared understanding on how the data is used by others in the data chain and the ultimate end users. By establishing these ‘rules of the road’ at the onset, we can minimize confusion and misunderstandings throughout the journey.
Can you provide a brief overview of the implications financial organizations can expect when pulling business lines together at an enterprise level?
By pulling business lines together at an enterprise level, financial institutions will find it easier to identify, measure, monitor and control concentrations of risk that is specific to them. It will inform the decision makers on matters relating to risk appetite, strategic planning and capital allocation. When the leaders can tell the ‘story’ of their organizations backed by accurate and reliable data- their stakeholders, regulators and markets are reassured that these companies have got what it takes to not only survive, but thrive in the long run.
How do you see the industry evolving over the next 6-12 months, particularly in relation to the current and upcoming political landscape and changing regulatory environment?
Whilst it may have been challenging for financial institutions to implement all the regulations introduced following the crisis, most of them did so successfully and this has resulted in better governed and capitalized banks. There has been a lot of talk around change and the easing of regulation or enforcement actions. I am not certain that banks would unwind what they have put in place especially as it relates to data. What I am watching with interest is the development, if any, in the non-regulated space. Market volatility returned this year and US loan growth is exceeding historical averages, with credit to non-banking corporations (hedge funds, private equity groups, mutual funds) reaching record levels. In April, the IMF’s Global Financial Stability Report cautioned us on the bumpy road ahead – I think we would do well to heed their advice and continue to manage and price risks accordingly. History has taught us that bad outcomes can come from decisions made during the good times and we just have to make sure we are using all our available tools, such as data to make sound risk management decisions.
Hear insights like this and more at the Annual Risk Americas Congress…