Introduction

Since the financial crisis, several banks have reorganised the Risk Management department so that it can effectively serve as a second line of defence against the excesses of business lines. Part of this goal is to ensure that information on key risk metrics is available to all stakeholders at all times so that damage from a potential tail event can be punctually forestalled. For effective management of such risks, dashboards have recently gained significant traction in the industry.

Key Findings

• Prevalence of Operational Risk Dashboards – 83% of banks in the survey acknowledged the existence of a Market Risk dashboard, with a figure of 100% for Credit Risk.

• Format – Although risk dashboards are prevalent, more than 70% of banks have introduced them in the form of written reports or spreadsheets for each risk category. A significant and rising number of banks, however, have developed interactive tools.

• Duration of Use – Banks that are using interactive tools for Market Risk have been doing so for at least three years in most cases. This differs markedly for interactive Credit Risk dashboards, nearly all of which have been introduced within the last one to three years.

• Frequency of Reporting – Market Risk metrics are monitored and reported weekly, daily or in real time. In contrast, owing to the lengthier holding periods for trades, Credit Risk measures are commonly monitored only monthly or, at best, daily. Real time access is only available when interactive tools are used.

• Drilling Down – At a significant number of banks, Credit Risk and Market Risk dashboards allow risk managers to drill down into any level of detail. At the same time, all remaining respondents from Credit Risk noted that this was not the case, although the level of detail provided at the outset was deemed to be sufficient.

Conclusion

A large majority of banks still rely on written reports and spreadsheets for management level dashboards in the Market Risk and Credit Risk space. While a notable, burgeoning proportion is also using interactive tools, it is dominated by smaller institutions, most of which have built these tools in-house. As progress in this area continues to be made, evident through the immense interest generated by this survey, it is expected that banks will soon converge upon best practice standards.

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Tagged with: credit risk, dashboard, dashboards, market risk, risk management, technology