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Integrating risk management through an enterprise architecture 69
INTEGRATE CREDIT RISK,
MARKET RISK, LIQUIDITY RISK
CLOSELY COLLABORATE
WITH AUDITING,
ACCOUNTING AND TOP
MANAGEMENT
DEVELOP AND USE STATE OF
THE ART REAL-TIME SYSTEM AND
POWERFUL ANALYTICAL TOOLS
Figure 4.3 A meta-level frame of reference for enterprise risk
management
By contrast, for insurers market and credit risks are not always easy to separate from
technical risks and, as a result, the various risk types would have to be integrated in
the models from the beginning.
4
Where this discussion leads us is that technical system integration alone, though
necessary, is by no means enough. Much more needs to be done in terms of providing
a homogeneous platform for methodologies, procedures and tools, and in regard to
attitudes towards risk management. Only then can we talk of an integrated system
in a factual and documented manner.
4.4 End-to-end architectural solutions
The infrastructure of an integrated risk management system, whose perspective was
discussed in section 4.3, will be a real-time network with messaging, transaction
handling, computing and databasing nodes, specifically studied for round-the-clock
sophisticated applications. This network will typically be architectured end to end
for seamless online services to managers, professionals and supporting staff. Besides
its risk control orientation, the technical solution must:
Provide mobility with security, and
Attack the roots of costs which make certain services uncompetitive.
The implementation of an end-to-end architectural solution requires a robust part-
ner community, including software developers, software vendors, resellers, original
equipment manufacturers (OEM), system integrators and other professionals who
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70 Risk management technology in financial services
add value to systems and services. The aim is that of extending the expertise of
in-house system designers, and therefore their reach. The targeted infrastructural
platform must be:
Enterprise ready,
Of high reliability,
Rich in development capabilities, and
Economically compelling.
The reference to a robust partner community is further sustained by the fact that
a financial institution’s private end-to-end network will not be necessarily privately
built. Rather, it will be a secure, virtual network running on wider publicly available
resources. An example is the Wing to Wing solution by General Electric, as seen by
the financial community.
Meetings with financial analysts on Wall Street revealed positive opinions on
GE’s Wing to Wing strategy, and its ability in effectively using Internet resources to
strengthen the links the company has with its customer base. The chosen approach
is bundling together a service characterized by dependable and cost-effective online
customer access. What particularly impressed the analysts is that, with this solution,
globalization is supported at two levels:
Physical facilities, and
Relocation of intellectual assets to fit a global client-oriented strategy.
Through its end-to-end architecture, GE is finding ways to leverage its expertise
to generate additional business from its customer base. The Wing to Wing approach
means that management can examine the entire process from both the customer’s
perspective and its own, coupling this to Internet-based business. This provides sig-
nificant growth opportunities for the firm’s operating technical divisions and for GE
Capital. As a result of strategic advantages:
GE’s business can be leveraged over a huge installed base, itself the product of
years of industry leadership.
The architecture can effectively tie customers to product lines and marketing
channels.
Value differentiation helps to increase asset values, making the company more
immune to economic vagaries than it has ever been.
There are many prerequisites to an effective end-to-end solution like the one
described in the preceding paragraphs. Design-wise, this will be a big system – and
it is proper to keep in perspective that big systems are not small systems which grew
over time by outpacing their original technical requirements and boundaries.
Big systems have their own design perspectives, and
These must be fulfilled in the most dependable manner, for the aggregate to perform
its mission at the 99.9 level of reliability (see Chapter 16).
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