From Bust to Robust: How IT Solutions Will Help Companies Return from the Brink

As recent history has taught us, companies that don't know what they don't know are at risk of failing spectacularly. To a large degree, executives over the past few years had been flying blind, even as their companies had been flying high on the wings of complicated debt instruments and complex derivatives.

This is not to say that human beings are not responsible for the implosion of AIG, Lehman Brothers or, for that matter, the Icelandic national banking system. But most of the companies lacked the technology tools that could have helped them see the warning signs before it was too late. Most legacy accounting and risk management systems simply were not built to handle the current volume and level of complexity of data related to financial transactions to, from and within many investment and retail banks.

More importantly, the systems that could handle the information were not designed to make it make sense. In other words, some legacy financial IT (FIT) systems might have been able to process transaction-level financial data in the months before the crisis, but few could enable the kind of analysis and reporting that would have raised red flags signaling a change in strategy was urgently needed.

Who's on first?

So, we find ourselves in an awkward place. On the one hand, companies were not looking for data on risks underlying their investments because they didn't know to look for it. And they didn't know to look for it because their systems—often consisting of Excel spreadsheets—couldn't provide it. But the systems were not designed to provide that information because companies didn't know to look for it in the first place. It all starts to sound like a high-stakes version of the Laurel and Hardy "Who's on first?" skit.

Some companies are working to cut through this confusion by implementing FIT systems that do more than replace Excel spreadsheets. The new breed of FIT solutions integrate the best of business process management (BPM) software with accounting, compliance and reporting applications to provide a complete picture of risk across the business. Both business users and IT users share tools that let them create the rules and pathways that bring data from the back office into a usable environment where business managers can act on them.