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CIOs urged to prepare for possible Euro break-up

Computerworld Philippines staff | Dec. 16, 2011
With extreme uncertainty plaguing all enterprises operating in the eurozone, CIOs must act immediately to protect their enterprises, according to Gartner, Inc. CIOs need to safeguard their enterprises from the risks of government/bank default, euro break-up, counterparty bankruptcy and employee/customer distress.

Millions of people are out of work in Europe. Formal government austerity packages and informal corporate restrictions on salaries, benefits and working conditions, combined with high costs of living, are stressing workforces. This situation is compounded by retirement funding shortfalls, extensions in the working age and loss of benefits.

"CIOs and business executives face significant HR issues in terms of rewarding and motivating staff, securing funds to hire appropriate new talent, and dealing with the personnel hardships of individuals entering the work environment, which impair productivity," Di Maio said. "They must also plan for retention issues of foreign workers moving to better opportunities or the removal of non-EU work permits and visas in response to political backlash from rapidly rising unemployment, resulting in a 'brain drain'."

Challenge 4: Risk Management

The capital markets (and many corporations) believe that the risk of government and counterparty default is substantial. Receivables management is being stressed, and the likelihood of internal and external fraud rises. From an IT standpoint, operational risk is heightened via issues such as changes in contractual obligations and business continuity. Added to this is the continued increase in regulatory compliance initiatives across industries, which exacerbate the pressure on audit and risk management assessments and workflows.

"Prior to the crisis, enterprises were already challenged to identify enterprisewide risks in a holistic fashion to link those risks to the performance of the business and to manage risk in a time-effective manner," Mr. Furlonger said. "Now, the CIO -- and corporate treasurer, head trader, CFO and others -- need to ask questions such as, 'Can existing risk models accommodate alternatives to the lack of historical data (in many cases, as much as three years of back data is

required) necessary for regression testing/yield curve analysis of hedges, and for stressing asset and liability portfolios in the event of a redenomination in all or part of their asset and liability portfolio?"

 

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