Operational Risk

Operational Risk

Managing risk is a part of doing business and preventing risk from turning into a problem is a primary goal of risk management.   If the primary goal fails and a problem occurs, mitigating that problem is of major importance.  An article by Deloitte called “Operational Risk Managers Lag in Use of Advanced Tech” states, “A first step to improving operational risk management programs is to develop a high-quality data repository that’s ready to be used with advanced analytics.”  Their survey found that 79% of C level executives agree that significant operational risk events affect shareholder value over the long term.

When asked what they thought would be the biggest challenge to their operational risk management program in the next 12 months?

• 3% process inefficiencies and internal protocols
• 1% lack of adequate technologies
• 8% balancing risk program enhancements with day to day business needs
• 8% poor data quality (integrity, location, data management)
• 2% lack of predictive capabilities, inability to sense emerging risks

1,515 participants 18.7% N/A

Source: Deloitte Dbriefs, “Operational Risk Management Implementation, data and analytics” – Copyright 2019 Deloitte.

Looking at the biggest challenges to their organization in the next 12 months:

(19.3%) Process inefficiencies and internal policies.  You need to add (17.8%) the balancing of risk program enhancements with the day to day business needs, totaling 37.1% of the respondents need better control and enforcement of policies while improving the efficiency of their processes.  In order to accomplish both, you need to integrate your risk management into your daily business processes.  RiskCALM₄ resolves the inefficiencies because it has integrated policy management and enforcement, within the account opening and lending processes.  In doing so, it eliminates the need for policy training as policies are automatic.  Whenever overridden, there is an alert to the stakeholder.    All of credit risk, AML/CFT risk, market risk and operational risk, are modeled (utilizing an IASB certified engine) where possible and qualitative analysis through what if scenarios, where needed for operational, market and credit risk (liquidity, interest, currency, etc.).

The second, fourth and fifth items of concern our RiskCALM₄ Solution answers also.  The integrated risk management technology, with automated policy and communications enforcement, eliminates the need of creating another silo, which creates more complexities and inefficiencies.  We automatically store all data and manage the sanctity, lineage and use of.  It also automatically audits and maintains historic audit files, for ease of reporting to correspondents, and government agencies.

Due to the integrated engine, all analytics are available as you grow into the requirements, such as predictive operational, credit and market problems and risk. We can also, as data becomes available, offer predictive customer sales or product success.

Framework Overview for Operational Risk Next.