Banks Boost Core Effectiveness and Efficiency with Integrated Risk Management Approach

A new era of risk management is underway in the banking industry, as institutions shift from reactive to proactive approaches to prevent financial crimes. By integrating fraud, financial crime, and cybersecurity functions, banks can enhance core effectiveness and efficiency across all channels, markets, and lines of business.

Predictive Analytics Key to Strategic Prevention

Predictive analytics is the key to this strategic prevention approach. It involves predicting where threats will emerge rather than simply reacting to them. Banks must redesign customer and internal operations processes based on continuous assessments of actual cases of fraud, financial crime, and cyberthreats. By adopting a holistic approach that considers the entire customer journey, banks can design controls around processes rather than points, significantly improving protection for both the bank and its customers.

Efficiencies Gained through Integration

The integrated fraud and cyber-risk functions can improve threat prediction and detection while eliminating duplication of effort and resources. Clarifying roles and responsibilities within the second line of defense ensures that no gaps are left between functions or within the organization as a whole. Consistent methodologies and processes, including risk taxonomy and identification, help build understanding and ownership of risks.

Data, Automation, and Analytics Drive Insights

By integrating data from separate functions and external sources, banks can enhance customer identification and verification using artificial intelligence and machine learning. This enables predictive analytics to produce rapid insights, establishing correlations between credential attacks, account takeovers, and criminal money movements. By overlaying these insights onto rules-based solutions, banks can reduce false positives in detection algorithms, lowering costs and improving investigator productivity.

Customer Experience and Digital Trust Enhanced

The integrated approach to fraud risk management can also result in an optimized customer experience, enhancing business outcomes through increased customer satisfaction. Segmentation of fraud and security controls according to customer needs and the use of automation and digitization to enhance the customer journey are key objectives. By fostering digital trust, banks can differentiate themselves as leaders in financial services.

Holistic View Crucial for Effective Risk Management

The transformed operating model requires a holistic view of the evolving landscape of financial crime, emphasizing the importance of independent oversight and challenge through clear roles and responsibilities across the three lines of defense. Institutions must integrate business, operations, security, and risk teams for efficient intelligence sharing and collaborative responses to threats.

Path Forward for Banks

Banks seeking to implement a unified operating model for financial crime, fraud, and cybersecurity should begin by integrating their cybersecurity and fraud units, probing questions about processes, people, data, technology, and governance. By redefining organizational “lines and boxes” and embracing utility thinking, banks can achieve greater risk effectiveness and efficiency, ultimately reducing costs and improving customer satisfaction.

Early Adopters Achieve Significant Gains

Leading banks have already achieved significant gains by integrating their fraud and cybersecurity functions. A US bank has established a holistic center of excellence for end-to-end decision making across fraud and cybersecurity, resulting in significant efficiency gains. A 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.

As the financial-services sector continues to evolve, banks that adopt an integrated approach to risk management will be better equipped to stay ahead of emerging threats and maintain their competitive edge.