Economic Crisis in Europe Article Review

Pages: 7 (2353 words)  ·  Bibliography Sources: 5  ·  Level: College Senior  ·  Topic: Economics

SAMPLE EXCERPT:

[. . .] By reducing the amount of decisions made by human operators, the risk for errors in inputting or analyzing information is greatly reduced. Automating audit systems also helps organizations determine if its processes are effective by identifying transactions outside of the norm for further evaluation.

Enterprise software provides information to the people that can act upon it making it a better tool for the communication of vital information then the typical upward communication scheme. The speed and power of computer systems is increasing, bringing information in the financial world to almost real time helping to increase risk mitigation.

The problem with information organized and assessed by computer systems is that people are interpreting the results of the data and can be inclined to certain bias's thereby changing the value of the information. By using certain procedures for identifying and reporting of anomalies, the red flags that might have been ignored by analysts due to their perceptions of the data's value instead come to the attention of decision makers.

Another problem with this technology is that computer systems are flawed in a sense from their inception. The organizational leaders decide what information should be analyzed, what information is needed for compliance and what decisions should be made by the system. These individuals do not always understand what should be measured to ascertain all of the risks they should be looking out for, especially those risks that may be hard to measure. The task of developing a software program to analyze certain data and identify risks is then handed over to the programmers who must interpret the vision of leadership into a workable program. This process involves a great deal of interpretation of regulations and laws by organizational leaders and computer programmers introducing flaws into the system from the multiple steps and influences involved in the process. The programmers and engineers that create the software have an entirely different set of parameters to deal with in working with the actual code that creates the formulas and programs which can cause problems.

Executives and leaders who receive computer generated reports are also prone to the bias of not questioning the accuracy of computer reports. In this situation, people in leadership are more likely to look for information to support what the reports state then to use their independent judgment to determine the accuracy of the information reported. The tunnel vision that develops over the use of technology often prevents decision makers from considering information outside of their software systems.

Another problem with computer technology in risk management is the group think tendency where various stakeholders move to develop standardized processes for identifying risks using computer programs. The standardization developed by a select group of leaders may leave out important variables that may otherwise be considered by having non-standard programs.

Computer programs and technology can be used against an organization, rather than for its good. The manipulation of information systems by knowledgeable actors can hide risky transactions that may otherwise come to light.

Technology offers advances in data organization, but is also flawed in trying to translate regulatory mandates into actual business practices. The limitations of technology and the failure to test and update formulas contributed to the failure of several financial institutions during the recent financial crisis. This situation brought to light the problems with relying heavily on technology without enough oversight from decision makers.

Computer programs that are used for regulation have the tendency to make the rules instead of allowing other influences like the market, changes in the law and public policy to establish appropriate internal controls. The computer aided systems used to control risk can become too automated and biased to be useful for evaluating all risks effectively and become detached from the regulations and policies with which they are designed to comply.

The problems inherent in using technology to evaluate and manage risk can be improved by having more transparency in the design of systems and assumptions employed in implement ting the processes to be used. It is further suggested that by allowing greater flexibility in disclosures of information that more financial institutions will be encouraged to operate under greater transparency for the good of the public.

References

Bamberger, K.. (2010). Technologies of Compliance: Risk and Regulation in a Digital Age. Texas Law Review, 88(4), 669-739. Retrieved January 21, 2011, from ABI/INFORM Global. (Document ID: 1995143041). http://www.egloballibrary.com/egl/html/institutes/1086/homepage/library.jsp

Corder, J. (2009). The Federal Reserve System and the Credit Crisis. Public Administration Review, 69(4), 623-631. doi:10.1111/j.1540-6210.2009.02011.x http://ehis.ebscohost.com.csuproxy.egloballibrary.com/ehost/detail?hid=6&sid=feb1c9d6-ff89-462b-9741-b5b3cfdd54aa%40sessionmgr12&vid=8&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=buh&AN=42960193

Europe finance: Time for Plan B. (2011, January). EIU ViewsWire. Retrieved January 19, 2011, from ABI/INFORM Global. (Document ID: 2241366821). http://www.egloballibrary.com/egl/html/institutes/1086/homepage/library.jsp

Torres, J.. (2011). China's Leadership Role during the Global Financial Crisis. Journal of American Academy of Business, Cambridge, 16(2), 81-88. Retrieved January 20, 2011, from ABI/INFORM Global. (Document ID: 2210001101). [END OF PREVIEW]

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Economic Crisis in Europe.  (2011, January 21).  Retrieved December 11, 2018, from https://www.essaytown.com/subjects/paper/economic-crisis-europe/6438651

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https://www.essaytown.com/subjects/paper/economic-crisis-europe/6438651.