Capturing the Elusive Promise of Big Data for Risk Management

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18 November 2014


Celent shares perspectives and tactical ideas to exploit emerging Big Data technologies for liquidity risk and operational risk management.

Risk management is no stranger to the utilization of sophisticated analytics and large data sets, but with the advent of what the IT industry calls Big Data, financial firms must start rethinking how things can be done differently, rather than “more of the same but bigger and faster.”

In the report Capturing the Elusive Promise of Big Data for Risk Management, Celent explores two key questions.

  • First, if we instill Big Data thinking into risk management, how would it look like to execute risk practices differently?
  • Second, if we adopt Big Data paradigms, to what degree can the Risk function add value and deliver timely intelligence to the business (e.g., pertaining to macro risks, liquidity, operational risks, reputational risks, and counterparties)?

“The hype and notions around Big Data are already in danger of being overused and overpromised, while real breakthroughs and compelling results are still few and far between,” says Cubillas Ding, research director in Celent’s Securities & Investments practice and author of the report. “Realizing the promise of Big Data will not merely be a matter of utilizing more data to do the same analytics. Firms need to shift their paradigms in the use of data in risk, financial management, and customer operations to drive well-informed business decisions.”

Looking forward, the best opportunities are yet to come, but there is work to do. Many financial firms can say that data matters for their business and risk operations to thrive, but day-to-day operations do not necessarily reflect this ambition. Now is the time to be serious about using risk data strategically, moving beyond lip service, and making it fit for purpose.

The real story of Big Data is in the shift in how data in utilized, not the technology. Financial firms need to get beyond industry hype and see how employing data strategically might improve how risk is managed in practice.

In this report, Celent shares perspectives and tactical ideas to exploit the application of emerging technologies within liquidity risk and operational risk management, both of which have high degrees of system heterogeneity, large data sets, and rapidly changing information flows — all areas where Big Data paradigms and technologies can add value.