Integration Key to Enhancing Risk Management Effectiveness
Staying Ahead of Sophisticated Threats with Integration
Banks are turning to integration as a means of improving their risk management capabilities in an effort to stay ahead of increasingly sophisticated threats. By combining their fraud, financial crime, and cybersecurity functions under a unified operating model, institutions can gain a more comprehensive understanding of risk and respond more effectively to emerging threats.
The Key to Successful Integration: Strategic Prevention
According to industry experts, the key to successful integration is adopting a strategic prevention approach that focuses on predicting rather than reacting to risk. This involves:
- Redesigning customer and internal operations processes based on continuous assessments of actual cases of fraud, financial crime, and cyberthreats
- Incorporating data analytics and machine learning to enhance predictive capabilities
Benefits of Integrated Risk Management
The benefits of integrated risk management are numerous, including:
- Improved threat prediction and detection
- Elimination of duplication of effort and resources
- Clarified roles and responsibilities
- Consistent methodologies and processes for a deeper understanding of risks
Leveraging Data, Automation, and Analytics
Integration can also enable banks to leverage their data, automation, and analytics capabilities more effectively by:
- Aggregating customer information from various sources
- Enhancing customer identification and verification
- Producing rapid insights to inform risk assessments
Optimized Customer Experience
The integrated approach can result in an optimized customer experience, which is critical for building digital trust. Customers place a high value on banks’ ability to manage fraud effectively, making this a key differentiator for institutions.
Achieving the Target State of Integrated Risk Management
To achieve the target state of integrated risk management, banks must:
- Define their processes and activities
- Define people and organization
- Define data and technology
- Define governance structures (see sidebar)
Most institutions begin by integrating their cybersecurity and fraud units, but ultimately aim to unify all risk functions relating to financial crimes under a single umbrella.
Real-World Examples of Integration Success
The benefits of integration are already being realized by leading institutions. For example:
- One US bank has established a holistic “center of excellence” that enables end-to-end decision making across fraud and cybersecurity, resulting in significant efficiency gains.
- Another global universal bank has combined all operations related to financial crimes into a single global utility, achieving a more holistic view of customer risk and reducing operating costs by approximately $100 million.
The Future of Integration
As criminal transgressions continue to evolve and break through traditional risk boundaries, integration will play an increasingly critical role in ensuring the effectiveness and efficiency of banks’ risk management capabilities. By adopting a unified approach to fraud, financial crime, and cybersecurity, institutions can stay ahead of emerging threats and maintain the trust of their customers.