Basle 2 places a greater onus on financial institutions in the utilization and collection of information around;

• Credit Risk – Internal Rating based vs. RWA
• Operational Risk – Inclusion of Operational Risk charge (AMA approaches and the need to supplement internal loss data with external losses)
• Enterprise Risk Management – Pillar 2 advocates the integration of risk management into the daily activities of an institution

If a financial institution does not take advantage of the advanced approaches for measuring and calculating risk exposures this may lead to many negative impacts including;

• capital requirements for business lines may be increase
• potential loss of competitive business advantage
• reputational risks resultant from market perception of control and sophistication if less advanced methodologies are undertaken

Certain other benefits are lost which are the byproducts associated with improved information gleamed as a result of infrastructure and management re-engineering resultant from that necessitated to adhere to the advanced approaches which include;

• additional regulatory requirements (e.g. GAAP and IAS),
• better risk-based pricing ability,
• improved MIS reporting,
• greater management control

The advent of Basle and the need for good business practices will drive new disciplines in C.A.V.E. compliance, Business Intelligence and Information Visualization