041809: Use technology as 'enabler,' banks urged

i.t. matters
Tuesday April 18, 2006 | MANILA, PHILIPPINES

News

Use technology as 'enabler,' banks urged

It's a fact that information technology (IT) is no longer the domain of just computer scientists or engineers.

Now that IT can spell the difference among competing companies, it has become imperative for company owners, chief executive officers, and managers to be more involved in the formulation of their businesses' IT strategies.

This is probably most helpful and applicable to banks, given that the marketplace has become increasingly competitive and regulated.

A bank therefore needs a clearer strategic level of understanding as to how it can maintain its edge over the competition while creating cost-efficient and effective workflow processes.

Banks should look at IT as an "enabler, that is, a tool that will enable you to do a better, more effective, and efficient business," said Lim Eng Hong, managing principal for risk management consulting of Atos Origin, in an interview with BusinessWorld.

Atos Origin, a leading international IT services provider, provides integrated design, build, and operate solutions to large multinational clients in carefully targeted industries.

Mr. Lim pointed out that banks' internal processes are finding it more difficult to keep up with increasingly stringent regulations because of data requirements. Drawing out historical data and detailed customer information quickly from diversified systems and manual records is a challenge that every bank needs to face.

"When you think about risk management, the biggest problem today is data. Data is everywhere -- operational data, data of the customers, data of the transaction, but how do you pool all these together so you will have single view of this customer?" Mr. Lim said.

Mr. Lim's areas of expertise include enterprise-wide risk management, mergers and acquisitions, operational risk, customer value management, economic risk capital allocation, and regulatory risk management.

"In a bank, you need to understand your own customer, [such as] how much this customer is giving you in terms of revenue. Should I cater something very specific for him? [The choice is] either [you] grow this customer or ignore him," he explained.

"If I am a manager, I should know your risk profile and risk appetite and what you are interested in so I can introduce you to specific bank products," Mr. Lim added.

There should be a structure that captures this information, Mr. Lim said. "IT becomes an important tool to make the right decision. A bank should be able to know how to rate its customers, whether good or bad."

IT, he said, could help a bank execute better cross-selling strategies that identify its most valuable customers and customize products and services.

IT also plays a crucial role in enhancing banks' capabilities for risk and finance management to comply with the growing number of global regulatory requirements like the so-called Basel 2.

The latest accord, "the second regulatory change to the global financial sector since the original Basel Accord in 1988," outlines global rules on how banks should operate and calls for an improvement in corporate governance following accounting scandals such as those involving energy firm Enron and WorldCom.

"Basel 2 is all about knowing your own set of customers. You determine the risk you want to take," Mr. Lim said.

Businesses should begin changing the way they handle regulatory compliance, he said. "Banks in the Philippines and in the entire Asia should not look at compliance as a chore. That has to change because compliance is no longer just a one-off thing, it will always be there, in fact it will always increase so if you do not put it as part of your business strategy, then you will always be struggling," Mr. Lim said.

He added, "Compliance is good for transparency. So it is good for my brand, customers will be more confident in me and will invest more into buying my products. If you look at it from that way, you will use technology to achieve your aims rather than use it as a way to mitigate regulatory impacts."

Mr. Lim, however, stressed that companies need not always use the latest and most modern technology. Banks only have to "maximize" what they have already put in place. They need to determine "how effective IT is being used in their businesses." IT must be linked to business objectives like "how much the business plans to generate," he said.

"The problem today, looking from a technological perspective, people always want the latest technology. It looks good but in the end does it really serve what the business does? Technology people want the best while business people say, we want it fast," Mr. Lim said.

"Business drives technology, business uses technology as an enabler to make them more effective. Don't work for technology but let the technology work for you." -- Karen L. Lema