The Role of IT and Risk Management in the Financial Crisis

Information Technology (IT) continues to play an ever larger role in the overall risk profile for major corporations across the globe.  A recent article in The Economist discusses the role IT played in the recent financial crisis.  While the financial services industry invests massive amounts in IT, the industry still does not invest enough in risk management tools that will help avert future crises.  Here is what the article noted.

No industry spends more on information technology than financial services: about $500 billion globally, more than a fifth of the total (see chart below). Many of the world’s computers, networking and storage systems live in the huge data centres run by banks. “Banks are essentially technology firms,” says Hugo Banziger, chief risk officer at Deutsche Bank. Yet most in the industry agree that its woeful IT systems have, in Mr Banziger’s words, “exacerbated the crisis”. The industry spent billions on being able to trade faster and make more money, but not nearly enough on creating the necessary transparency. “Banks had lots of tools to create leverage, but not many to manage risk,” says Roger Portnoy of Daylight Venture Partners, a venture-capital firm that invests in risk-management start-ups.

Wheelhouse Advisors provides solutions to financial services companies looking to strengthen their risk management practices with better information technology tools.  Together with our strategic partners, Wheelhouse Advisors can deliver cost-effective solutions that can be easily implemented within a complex environment.  Visit www.WheelhouseAdvisors.com, to learn more about our services and our strategic partners.