For Datamation readers, the choice was clear: Garnering twice as many
votes as its closest competitor, SAS Institute’s Credit Risk Management
software was voted first place winner in the Compliance category for our
annual Product of the Year competition.
Readers voted Cognos Controller from Cognos Inc., the number two product
in the Compliance category, while Enterprise Configuration Manager from
Configuresoft grabbed the third-place finish.
With compliance mandates in the forefront of most business
decision-makers minds, industry watchers expect IT spending on compliance
solutions to soar in 2005. Targeting the financial industry in
particular, SAS Credit Risk Management enables users to assess and report
the risk of potential credit losses and calculate capital reserves
required to cover that risk. Without the appropriate controls in place
for credit risk management, financial institutions risk regulatory
noncompliance and financial instability.
”The benefits of credit risk management is that this type of solution
gives a company a better understanding of risk and the ability to analyze
risk,” says Mary Knox, a research director at Gartner Inc., adding that,
in short, this enables the company to conduct better business.
While this type of product is not new, the nature of credit risk
management is changing.
According to Knox, the direction of this type of software is shifting to
an enterprise focus from a departmental focus; product extensibility from
a single application to other systems within an organization; and,
towards including proactive kinds of capability.
”The objective is not just to review risk after the fact, but to
identify patterns and trends and support predictive risk management,”
According to SAS, Credit Risk Management enables users to access and
aggregate credit data across disparate systems and sources; integrate
credit scoring/internal rating with credit portfolio risk assessment;
forecast, measure, monitor and report potential credit risk exposures
across the entire organization, both on the counterparty level and
portfolio level; evaluate alternative strategies for pricing, hedging or
transferring credit risk; optimize allocation of regulatory capital and
economic capital; and, facilitate regulatory compliance and risk
disclosure requirements for a wide variety of regulations, such as the
New Basel Capital Accord, or Basel II.
In a recent report on effective credit risk management, produced jointly
by SAS and Lepus, a U.K.-based investment banking management consultancy,
industry participants agreed that technology played a key role in
effective credit risk management.
However, Gartner’s Knox notes, ”Technology alone won’t take care of
risk, but it is an important piece of an overall credit risk management
Having a credit risk strategy in place is not new at Lloyd’s TSB, the
U.K.’s largest consumer bank, with assets of about $407 billion. In fact,
the financial institution has had such a strategy in place for about a
decade. Today, the bank uses SAS Credit Risk Management, as part of a new
initiative, prompted by Basel II, to enhance its existing risk management
systems while also enhancing the bank’s reputation and reaping financial
Basel II also prompted Australia’s BankWest to implement SAS Credit Risk
Management. According to the vendor, the solution will help BankWest not
only meet compliance requirements under international banking
regulations, but gain competitive advantages in its industry.