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Financial services companies face an array of demanding and ongoing challenges, including global competition, mergers, acquisitions, converging service offerings, and an imperative to build and maintain customer loyalty.
At the same time, a growing array of compliance mandates, such as Sarbanes-Oxley and Basel II, require financial services companies to report and manage the operational risks they face—that is, the risk of financial losses resulting from “internal processes, people and systems, or from external events,” as Basel II defines it. This includes everything from errors in processing transactions to physical threats to branches, ATMs and data centers. A significant component of operational risk is IT risk: the risk of operational losses resulting from IT systems and processes, including system downtime, data loss or theft, and software bugs.
The importance of managing IT risk continues to grow as financial services organizations look to IT to help them improve service quality, enhance overall business agility and increase responsiveness to governance and compliance mandates—all while keeping a razor-sharp eye on IT costs.
Many financial services organizations are addressing these needs by consolidating systems and eliminating silos of information wherever possible. By taking a strategic approach to reducing IT complexity and improving reliability and manageability, companies can mitigate operational risk while boosting the return on IT investments. IT asset management is a cornerstone of this approach.
This paper examines the landscape of operational risk from an IT perspective, and suggests ways in which an IT asset management solution can reduce IT risk while conferring strategic benefits. It concludes with a discussion of the capabilities of IBM Maximo® Asset Management for IT from this perspective.
The strategic value of IT asset management
Having grown over the years through mergers and acquisitions (M&A) and the addition of new service offerings, financial services companies have amassed a great diversity of IT hardware and software assets. These include legacy systems supporting core banking services, along with newer, add-on systems to support branch services, online banking and trading, ATM networks, and more.
In such complex environments, it can be exceedingly difficult and costly to obtain accurate asset data for analysis and reporting purposes related to mitigating operational risk. IT departments may also lack the asset data so essential for change and configuration management processes in support of improved service quality.
IT asset management focus and goals
IT asset management is concerned with all inventory, financial and compliance functions related to the management of IT hardware and software assets throughout their life cycle, as well as supporting strategic decision making related to IT asset costs, risks and compliance issues. This fundamental discipline empowers IT departments to optimize costs, improve service quality and credibility, and demonstrate business value.
When IT-related problems such as network outages, server crashes or security breaches interrupt key business processes, financial services companies can face not only disgruntled customers and lost business, but also legal liabilities, compliance sanctions and damage to brand reputation. For example, headlines recently reported that a service outage in a global electronic financial and commodity trading system resulted in an hour-long disruption in foreign exchange trading. While few IT failures are this catastrophic, the net impacts of multiple, smaller losses are equally significant.
IT asset management can also help enable companies to reduce IT cost and complexity, both of which relate indirectly to IT risk. M&A activity, for example, increases the need to manage IT hardware and software assets to ensure license compliance, help eliminate redundancy, streamline asset-related reporting and manage newly acquired assets in line with overall business priorities.
IT asset management and cost efficiency
IT assets have a direct impact on business performance. If they are not managed effectively, the business may waste time, money and effort, possibly constraining the ability to respond to market demands.
Conversely, IT asset management can reduce IT hardware and software costs while mitigating the financial risks of improper IT asset management. For example, IT asset management helps maintain up-to-date inventories, supporting more accurate accounting for financial, tax and compliance reporting purposes. IT asset management also enables companies to increase the value of their software licenses, helping to reduce the likelihood of overbuying as well as the risks associated with under-licensing.
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