Risk Analytics in Banking and Financial Services
Data is increasingly recognized as a strategic enabler for the modern enterprise, and the same logic applies to banks and credit unions. These financial institutions rely heavily on complex risk-reward scenarios that help them sustain profitability in light of shifting market conditions.
At their core, risk analytics solutions empower financial services organizations to accelerate decision-making and incorporate alternative data sources into their decisions. When this functionality is expanded to its full potential, however, analytics ends up having a much more sweeping impact.
Three broader areas where risk analytics is transforming the banking sector are:
1. Process automation
Automation is emerging as a growing trend across a variety of sectors. A recent PricewaterhouseCoopers report emphasized that businesses must be prepared to consider just how deep automation can go. Research from PwC indicates that automation could have an economic impact of $2 trillion in workforce savings as organizations develop strategies to streamline and optimize a wider range of operations.
At this point, automation programs often build from a start with analytics into increased use of robotic process automation and, eventually, artificial intelligence, PwC explained.
There’s a simple reason why analytics is the foundation of automation: Most automation software systems require accurate, high-quality data in order to analyze what is happening in a work environment and trigger a process.
As such, analytics tools are vital in pinning down key trends, sending data to relevant user groups and launching processes without human intervention. For financial services firms, risk analytics can be used throughout the entire lending process to serve as a basis for process and workflow automation, particularly in tasks that cross organizational boundaries.
2. Regulatory compliance
“Data-based automation strategies can foster stronger regulatory practices.”
The ability to employ data-based automation strategies can also foster stronger regulatory practices, an increasingly important need across the financial services sector.
Deloitte reported that while policy and legal issues are creating a great deal of uncertainty about the nuances around industry regulations, banks are still pushing hard to improve their regulatory operations. In response, a great deal of work is being done to centralize information while employing both standardization and automation to drive efficiency gains.
Risk analytics platforms can support regulatory compliance by creating an automated electronic paper trail detailing the information handled by employees, who interacted with it, when they viewed it and what was done with it. By eliminating manual data management in loan application processes, risk automation solutions end up dramatically streamlining regulatory tasks.
3. Fraud prevention
Many of the benefits already mentioned apply to risk management and fraud prevention. In short, if your employees are spending less time on tedious manual tasks and regulatory documentation, they can then put more of their resources into fraud prevention.
On top of that, risk management platforms can gather larger quantities of customer information, creating profiles from alternative data sources that make it easier to identify any signs of fraud in an application. The result is a much more efficient and data-driven ID verification process.
Risk analytics solutions don’t function in isolation. Instead, the technology can have a sweeping impact on banking, transforming a wide range of operations.
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