Technology seems to be residing in our hearts from time immemorial. Computers were brought to the market long back. In today’s global market, we need to make intelligent, sound, and quick decisions. Having the access and visibility into the required information achieves that objective, says D N Prahlad, Chairman, Surya Software at NBFC100 Tech Summit in Chennai.
Without the stringent use of technology, one would possess no special need for proactive cash management and the financial markets we know today and many of the great software products would not exist that are leveraged by C-suite officers.
The complexity comes from all these heterogeneous instruments. There are instruments which are contracted, contracted maturities, contracted maturities with payment holidays in all kinds of structures. All this both are on both the asset and liabilities side. Specifically, on the liabilities side you have both demand liabilities and contracted maturities. So, therefore this heterogeneity makes room for complexity. For example, a loan origination system is very different from a deposit making system, but their common effects are to be found in a general ledger and if the ledger is badly defined, that results in its own sets of problems.
Finally, the risk is not a funny thing because the risk is based on cash flows alone. Risk needs to be correlated with various aspects. Dividing the data between internal and external; the people who do risk management have this temptation to start with the highest degree of complexity and then they begin to say that the complexity will be reduced as they are not able to achieve it.
But I feel, it should be the other way round; one should begin with something very simple and then keep refining that. Data posted to the ledger may not be the same that you have on the books, mainly because of posting and timing errors. Talking about external data, some feel it is not relevant while I feel that the regulators are increasingly asking for the lower and lower granularity of data classifications. Large volumes of external data are available today. All your data is available for credit assessment in terms of when you put your details on Facebook and Linkedin in terms of your connections, which is readily available in the market to be sold. To sum I all I would like to say that there is a lot of noise in external data and separating signal from noise is the need of the hour.