Risk Management Software and Basel II

Basel II - A brief overview

In terms of risks the business of financial institutions can be described as management of credit, market, liquidity and operational risks. Recent instabilities in the financial sector lead to the development of Basel II - the new Capital Accord that targets at internal control systems and management within banks. Solvency II is an equivalent for insurance companies.

The requirements of Basel II (and Solvency II analog) are put into three so-called pillars:

Minimum Capital Requirements: These are rules to calculate required capital. The required capital is based on market risks (risk of adverse price movements), credit risks (risk that a borrower might not honour his contractual obligations), and operational risks (risk of loss resulting from inadequate internal processes or external effects).
Supervisory Review Process: Banks shall ensure to have sound internal processes to assess adequacy of capital based on risk evaluation.
Enhanced Disclosure: It aims to provide market discipline in form of disclosure requirements that are intended to provide information about a bank's exposure to risks.

The Basel II impact on non-financial organisations

Basel II developed for the financial institutions has an indirect impact on non-financial business. Basel II refers to market, credit, liquidity and operational risks of banks. These risks are carried over to the clients of the bank. When they interact with their clients, the banks assess the risk of such interaction. Finally, when the client can proof to the bank that they do not put the bank business at risk, they quality for better conditions, e.g. pay less for a bank loan.

Conclusion: Basel II makes it necessary for all businesses to establish a risk management system by which the risk situation can be shown to a bank.

Basel II and

Enterprise Risk Register® is a valuable tools to improve the risk management in a cost efficient way. It can help you getting better risk ratings by your bank.

Enterprise Risk Register® assists you to collect all risks identified in its risk log or risk register. It helps you to provide consistency across a project and even the entire organisation.

Enterprise Risk Register® supports qualitative risk assessments and provides the ability to record, sort and filter data by all its characteristics.

And Enterprise Risk Register® allows you to collect treatments against the risks and analyse the effect of implementing the treatments. This way it demonstrates successful risk management leading to cost reduction.