With so much attention in the business intelligence world paid to top line initiatives like revenue generation and customer acquisition, using the technology to understand and manage risk might seem a lesser priority. Growing the business is something every businessperson and every IT person supporting business wants to be doing. Then again, risk is corollary and critical to any business environment, favorable or not. In an ideal market, companies would manage risk in a growth environment in order to secure gains and grow even further. This is the fortunate circumstance presently being addressed at GE Real Estate, one of the less glamorous arms of the General Electric conglomerate that is nonetheless delivering 7 percent of GE's overall profits. At the helm of the project, GE Real Estate CIO Hank Zupnick thinks that the data warehouse-driven risk management program at his company is a firm contributor to that 7 percent contribution.
At GE Real Estate, risk is measured across variables that address geography, borrowers and interest rates. For example, geographic risk addresses concentration, because a lender never wants to own too large a share of a given market. Then there's borrower risk. "Borrower risk might look at, 'do we have too much money with a borrower, do we understand the underlying financials of that borrower?" Zupnick says. In a similar way, market risk addresses sensitivities such as interest rates. "If we've got a fixed-rate loan out and the cost of funds goes up, a loan that's been profitable might suddenly become a lot less profitable," Zupnick says. "We can't necessarily change this if a borrower has signed on for a fixed term, but we can understand our exposure and perhaps apply resources to mitigate it."
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