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Top financial business drivers swing factors examined
NEEDHAM, Mass. (10/23/08)--The financial crises of 2008 serves as an ultimatum to regulators and financial services institutions (FSIs) to swiftly adopt a more integrated risk management framework or face irreparable loss of confidence in the financial industry, according to TowerGroup research.
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The call to action is a core finding of new research exploring the top 10 fundamental forces driving the financial services industry today and into 2009. The industry must undergo core structural shifts to better account for diverse and interdependent risk types, said TowerGroup. The result will be more transparent and timely gauges of liquidity and credit risk positions, which were lacking in the run-up to the current crisis, TowerGroup said. “Aside from the continuing losses, credit exposures, and liquidity constraints, the turmoil inflicted an even more severe trauma to many financial services institutions and the industry as a whole--specifically the loss of public confidence and trust,” said Guillermo Kopp, executive director and global research fellow at TowerGroup. “Systemic interdependencies between risk types have created exposure levels that have transcended the financial clout of any single institution or jurisdiction and pose a threat to the industry and the economy,” he added. TowerGroup’s “top 10” business drivers for 2009 will evolve as the industry prepares for renewed challenges and opportunities. Although local concerns relative to credit, liquidity, margins, and performance still dominate the scene, the industry should pay heed to growth possibilities emerging around the globe, TowerGroup said. TowerGroup believes that FSIs need to catch up with structural shifts occurring within and outside the industry. For example:
* Polarization between leaders and laggards will continue to increase in aspects such as financial performance, client relationships and market share gains; * Whether or not individual FSIs embrace innovation, advances in technology and business process continue relentlessly and will act as a catalyst for improved FSI performance; * In emerging from the present shock, FSIs must integrate their risk management systems, spread liquidity and credit risk, broaden sources of funding, and ensure they have an integrated and comprehensive view of their business transactions in real time; * To deliver optimal value to their clients, institutions must move beyond current defensive strategies to integrate processes, invest in advanced technologies, partner with an ecosystem of capable industry providers, and continue to innovate; * Globalization is picking up speed and the world's economy is increasingly interdependent, so internationally minded FSIs need to adopt a genuinely multidirectional approach; and * As information technology budgets have become more constrained, FSIs must consolidate and rationalize technology resources to free up investment capacity for vital projects.

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