Regulatory and market pressures are prompting financial services organisations to modernise and integrate their risk and finance processes, says analytics multinational SAS Africa head of risk Gabor Szalontai.
There is much more data available to assess risks, with platforms designed to help risk practitioners make sense of the greater volumes of data more quickly to identify patterns and relationships. This leads to better risk management and valuable insights for risk and finance practitioners, he says.
Banks and financial service providers increasingly recognise the role that analytics, data science and Big Data play in their environments, as well as the associated knock-on effect that banks are expected to use more information to make more accurate and real-time financial and risk decisions.
Digitalisation and transformation have provided an opportunity for corporations to strive for efficiency and transparency. However, these digital trends also expose them to threats from sources in-house and externally, Szalontai adds.
“The roles of risk and information technology complement each other in addressing unanticipated threats and managing regulatory risks in today’s dynamic business landscape.”
The new data-protection regulations have also led to an increase in the importance of the safety and protection, which is paramount with regard to client data. This also helps to ensure that personal data is secure at all times, and is managed and used appropriately.
Systems and platforms are necessary to manage and secure data as part of financial risk management and is one of the drivers of modernising risk management practices, he adds.
Further, the real-time component of many of the analytics systems and platforms helps practitioners to identify and manage potential instances of fraud. While preventing fraud is the objective, the management and potential curtailing of suspected fraudulent activities and transactions as they occur or before they can be processed comprise one of the capabilities provided by the evolution of technologies used by risk practitioners.
Szalontai cites the example of banks using geolocation information to determine the likelihood of whether a transaction request is real or fraudulent, based on the use-patterns of the client and the location of the request. This is currently a standard fraud-prevention mechanism.
Such capabilities are currently available to any credit provider and financial service organisation to improve its risks assessments.
“Technology is an enabler to process computations of large amounts of granular data for complex risk models in reduced time. This is part of the continuous evolution of risk management practices in an increasingly digitalised environment leading to innovative and technology-enabled approaches for financial service organisations and individual practitioners.
Companies and risk practitioners can draw on an increasingly broad range of data to assess risk. For example, fraud investigation teams can use the wealth of data to map relationships between legal entities and determine possible weaknesses or the likelihood that a transaction is fraudulent.”
Risk management practices are continuously evolving in response to new regulations and best practices, which includes linking the risk environment to governance measures.
Best practices, risk management strategies and frameworks increase resilience to current and future threats by more accurately evaluating and managing risk through powerful analytics and increased collaboration across various parts of the business, he emphasises.
The risk processes of banks and financial service providers will continue to evolve in the digital space, bringing an increased analytics requirement. However, the investments made to meet regulatory and compliance requirements can be leveraged to generate business value, concludes Szalontai.