Automation is not a substitute for human skills when it comes to analyzing and leveraging risk data.
Based on our analysis of 20 systemically important banks, in terms of capabilities, 53 percent of the SIBs surveyed have seen a definite improvement in the skills of their board risk committee in the past three years, and an additional 36 percent have experienced “somewhat” of an improvement. The quality and timeliness of information is a major challenge for the BRC. However, the inability to interpret the information is regarded as a top challenge by just six percent of the SIBs. This suggests that if the information is of the right quality and received in a timely fashion, members of the BRC are considered to have the skills available to be able to analyze it effectively. The key question becomes whether or not the skills have improved enough to meet the rising expectations of the other stakeholders and regulators. This is of course very hard to measure, as only a crisis would reveal whether a financial institution is capable of withstanding the shock.
Given the speed of change in the industry and the importance of capabilities, it would seem essential that the effectiveness of the BRC is formally assessed, however here is what we found:
The level of independent assessment is surprisingly low. In this period of rapid change, independent assessment is needed to track whether the effectiveness of the BRC measures up to the risk standards that are expected of them.