Monday, December 07, 2009

Is I.T. Responsible for the Economic Crisis?

I work in Information Technology, so I am sharply aware of the dangers inherent in a badly-built set of systems. It is not just the risk of the Blue-Screen of Death that Windows users are familiar with, or the spinning beachball that haunts Apple users. Even a system that never crashes can be a danger to your business if it doesn't get you the info you need, when you need it. A logical question then, is whether better I.T. systems could have prevented the Economic Crash.

This fragmented IT landscape made it exceedingly difficult to track a bank’s overall risk exposure before and during the crisis. Mainly as a result of the Basel 2 capital accords, many banks had put in new systems to calculate their aggregate exposure. Royal Bank of Scotland (RBS) spent more than $100m to comply with Basel 2. But in most cases the aggregate risk was only calculated once a day and some figures were not worth the pixels they were made of.

During the turmoil many banks had to carry out big fact-finding missions to see where they stood. “Answering such questions as ‘What is my exposure to this counterparty?’ should take minutes. But it often took hours, if not days,” says Peyman Mestchian, managing partner at Chartis Research, an advisory firm.
Of course, it never helps to blame technology for the failings of human nature and human decisions. But poor human decisions about technology can lead to even more poor human decisions. Quality counts.

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