Wednesday, September 17, 2008


Thoughts on Basel II

Basel II is making its way to America and is a solution to many of our "governance" problemschallenges, yet they could have invited us enterprisey architects to help make it even stronger...

Within many enterprises, the notion of a common message format is all the rage within enterprise architecture. The thought that an enterprise can have a global taxonomy such that all of its systems can talk to each other while avoiding semantic integration headaches is the goal. So, how come Basel II folks didn't consider a taxonomy for describing risk reporting?

Do we think we can understand risk throughout the planet if there is no taxonomy that everyone uses? The word risk itself has many different meanings to different enterprises.For business people, Risk is an omnipresent feature of life, an attribute to calculate potential returns or losses in investments. Many business careers are made by taking risks. For an IT person, Risk is something to be avoided at all costs, the result of flaws in architecture that lead to vulnerabilities and loss. Many IT careers are lost by taking risks.

So, wouldn't it be cool if Oasis or even OWASP for that matter got together a few of their best and brightest and figured out how to describe the notion of risk within XML? Unwavering clarity around reporting of credit, market, operational incident, loss events and IT architecture all need one way to be described in order to be exchanged without semantic loss of fidelity.

Imagine if us within the insurance vertical could encourage all those actuarial types we work with to noodle creating such a specification along with us in an open source way. The insurance vertical is best positioned to nail this challenge as they best understand risk and the elements of it such as incidents, events, losses, claims, exposures, forecast and reserves since this is what they do all day, every day...

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