Moreover, "Creating a risk taxonomy using XBRL will provide a vocabulary and a common language allowing everyone to understand what risk means, and that's the first step in making it easier to calculate and report," Adler said in a statement. "When we have semantic clarity around the way organizations describe risk, incidents, events, losses, claims, exposures, forecasts and reserves, it gets easier to aggregate loss information, analyze it with standard actuarial methods, compare past exposures to present conditions and opportunities, and forecast potential outcomes."
According to the Council, an XBRL Taxonomy of Risk could serve as a fundamental building block to enable interoperability and standard practices in measuring risk worldwide. Such standards could potentially enable Central Banks to manage vast databases of loss history and trend analyses that could better inform policymakers and member banks, helping to minimize risk and produce better returns.
Anthony Fragnito, CEO of XBRL International, said his organization is glad to be involved with the IBM council effort.
"XBRL is gaining widespread adoption among global capital markets [and] banking and securities regulators, and plays an important role in market reforms by contributing to transparency and process enhancements," Fragnito said.
The council is seeking proposals and discussion on its proposed specification for XBRL for risk reporting. The next meeting about this specification will take place Feb. 26-27, 2009, in New York in a combined effort with the SEC, the Enterprise Data Management Council, the Financial Services Technology Consortium, XBRL International and XBRL.US.
"This is an opportunity for both improving the effectiveness of the risk management function and the quality of reports," said Dan Schutzer, executive director of the Financial Services Technology Consortium. "XBRL for risk reporting also holds the potential for cost reduction through the development of consistent, clear and comprehensive reporting standards."
The IBM Data Governance Council is a group of 50 global companies, including Abbott Labs, American Express, Bank of America, Bank of Tokyo-Mitsubishi UFJ, Bank of Montreal, Bell Canada, Citibank, Deutsche Bank, Discover Financial, Kasikornbank, MasterCard, Nordea Bank, Wachovia and the World Bank.