Magazine article American Banker

IBM to Analyze Pooled Risk Data for Consortium

Magazine article American Banker

IBM to Analyze Pooled Risk Data for Consortium

Article excerpt

International Business Machines Corp. has been hired to analyze a massive pool of operational risk data that the Operational Riskdata Exchange Association, a consortium of 37 major international banking companies, has been compiling for years.

The Armonk, N.Y., company signed a contract last week to look for trends and patterns in data contained in the database.

The consortium of North American and European banking companies created the database in 2002 to pool information anonymously. Members began populating the database in 2004, but the data has been largely untapped.

"It's the first time that this type of capability is going to be dedicated to the data set that ORX has," said Joe Sabatini, the chairman of the consortium and the managing director and head of corporate operational risk for JPMorgan Chase & Co. The information within "is a window on the industry" and could provide some powerful insights for the banks that have access to it.

Today there are about 63,000 entries in the database, he said.

IBM is absolutely necessary to this process, Mr. Sabatini said. Any company could perform its own analysis on its own data, but "the difficulty is that no individual member has the analytic resource" to "do analysis across the full pool of data."

Because the entries are meant to be anonymous, some important details have been stripped out of them for privacy concerns, he said. For example, information such as the geographic region in which a loss occurred, or the revenue for the business line that incurred a loss, is taken out.

However, as a third party, IBM will have access to some of that information to conduct more thorough research. It will not include the redacted information in its final results.

"IBM will have the data, but they won't have the name of the banks associated with the individual data points," Mr. …

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