The IBM Data Governance Council is exploring the use of XBRL, Extensible Business Reporting Language, a software language used to describe business terms in financial reports, for risk reporting. The IBM Data Governance Council is also seeking input from banks and financial institutions, corporations, vendors, and regulators with the goal of creating a standards-based approach to risk reporting.
In a move to provide businesses with consistent tools for measuring
aggregate risk in the financial world and to provide a more a real-time view of
market exposure, the IBM
Council is seeking input from banks and financial institutions, corporations,
vendors, and regulators to create a standards-based approach to risk reporting.
The IBM Data Governance Council is also
exploring the usefulness of XBRL (Extensible Business Reporting Language), a
software language for describing business terms in financial reports, in risk
reporting, said Steve Adler, chairman of the IBM
Data Governance Council, in an interview with eWEEK. XBRL could be used to
provide a nonproprietary way of reporting risk that could potentially be
applied worldwide, Adler said. It is already widely used for financial
reporting throughout Europe, Australia
and Japan, and
the SEC (Securities and Exchange Commission) has proposed its use among American
firms in 2009.
"What we're doing here is we're announcing a standards-based initiative
for risk reporting," Adler said.
Adler noted that risk comes in many forms-from the financial exposure to
credit, market and operational risk to the broader societal exposure to
economic, pandemic and natural catastrophe risk. At the heart of the current
economic downturn are the credit and liquidity problems that have stemmed from
the inability of many financial firms to track or measure their risk positions.
In all its guises, risk is difficult to track, even harder to measure and
model, and almost impossible to completely avoid.
Adler said in today's environment, organizations have inconsistent methods
and vague language for disclosing operational, market and credit risk. And such
inconsistencies make regulatory oversight extremely difficult and complex. The
first step to enabling new transparency of risk and exposure in the financial
services industry is semantic clarity-a precise method for consistently
describing and reporting risk across all organizations, he said.
Such transparency could provide a new macroeconomic tool and greater fiscal
accountability for regulators, investors and central banks worldwide, making it
easier to identify toxic assets on the books, mitigate fraud, help prevent
wide-scale fiscal crisis and rebuild confidence in financial systems, Adler
"Individual participants are unable to adequately measure the impact of
their decisions on other entities," Adler said. "We have so much data
flying around that you have no way of tracking the impact of a decision on the
aggregate. With this announcement we're trying to figure a semantic reality to
better understand risk."