Integrated Risk Management Allows your Organization to be Digitally Relevant

Integrated Risk Management Allows your Organization to be Digitally Relevant

This is possibly the most difficult white paper of the series. Integrated risk management is a difficult concept. First, consider the compliance issues of IFRS 9, AML/CFT, KYC, and the impact they have on your business processes. The delays in account openings/originations and the effort involved can be costly in manpower and in lost business. Further, how can you grow your online business if you can’t process quickly in this world of instant gratification?

Integrated IFRS 9 Credit Risk Model

With IFRS 9, how can you legitimately be forward looking on probability of default when originating a loan, if you stop and run the credit risk model of each loan request through a spreadsheet or a stand-alone model? With all the data factors required, how many online loans are you going to originate? How long will it take to originate any loans? Also, how long will it take you to determine the provisioning amount of any loan and its impact on your capital requirements? How long will the delays be to your customer to originate a loan — a day, a week? How many loan opportunities will you lose due to the amount of time it takes for the origination of a loan? RiskCALM4 can solve these concerns!

Integrated AML/CFT, KYC, Risk-Based Management Programs

I’ve read and been told that opening accounts can take up to or beyond a month. How does that impact business? How much does it cost an institution to search databases and ask and collect all the information required to prove due diligence of your risk-based AML program? How long does it take to fill out Suspicious Activity Reports (SAR)? How much time does it take to put together packages to substantiate your due diligence process for correspondent relations? Add all these times and their manpower costs, and add in the loss of business due to delays, and it’s very expensive! Think of the business you can add and the money you can save if you could automatically search outside databases during the account opening process, collect all the data required, follow and document all policies, whether adhered to or overridden, and complete your AML program requirements in one meeting with a client? RiskCALM4 can solve these problems!

Conclusion

Integrated risk management in today’s climate of terrorism and money laundering becomes essential to your business processes and to your bottom line. It impacts your credit risk management and compliance with IFRS 9, as well as AML/CFT, KYC. Without it being seamlessly integrated in your business processes of lending and deposits, your business cannot meet both the demands of today’s consumer and regulatory compliance.

Truly, most institutions realize that online business processes and compliance requirements will continue to grow. In today’s world of instant gratification, the invisible customer will walk away from a financial organization, if timely service is not provided, and they will find a financial organization that will satisfy their needs.

Integrated systems are a competitive necessity; however, it is also important to understand that these integrated systems do much more than meets the eye:

• They retain all data collected and time stamp it to the risk model or program that utilizes the data
• Verifies and sanitizes the data before use
• Manages data to verify findings in the future
• Utilizes meta data to improve predictive modeling
• Automates and manages all policies during lending and deposit processes
• Alerts all stakeholders automatically of any issues

Perhaps the most important impact of integrated risk management is the ability to create for your organization a digital relevancy that will transform your online business processes and business. Enabling:

• B2B, B2C and C2C business networks
• Account opening
• Loan origination
• Life cycle financial analysis
• Cross-selling

Read our next white paper in this series: Online Digital Innovation with RiskCALM₄.