Unified Risk Management Operating Model for Financial Crime
In today’s evolving landscape of financial crime, it is essential for banks to adopt a unified risk management operating model that efficiently and effectively addresses fraud, financial crime, and cybersecurity risks. The current siloed approach is no longer effective in managing these risks.
Key Benefits of a Unified Operating Model
- Strategic Prevention: Predicting risk rather than reacting to it by redesigning customer and internal operations and processes based on a continuous assessment of actual cases of fraud, financial crime, and cyberthreats.
- Efficiencies of Scale and Processes: Integrating operational processes can improve threat prediction and detection while eliminating duplication of effort and resources.
- Data, Automation, and Analytics: Integration enables the anti-fraud potential of data, automation, and analytics to be more fully realized, enhancing customer identification and verification, predictive analytics, and reducing false positives in detection algorithms.
- The Customer Experience and Digital Trust: An integrated approach can result in an optimized customer experience, fostering digital trust as a customer differentiator for banks.
- Holistic View: The objective is to have a holistic view of the evolving landscape of financial crime, emphasizing independent oversight and challenge through clearly delineated duties in the three lines of defense.
Achieving a Unified Operating Model
To achieve this unified operating model, banks should ask key questions about:
Processes and Activities
- What processes can be integrated or streamlined to improve efficiency?
- How can we optimize customer and internal operations?
People and Organization
- What skills and expertise are required for a unified risk function?
- How can we align organizational structures and roles?
Data and Technology
- What data sources can be integrated to enhance predictive analytics?
- How can automation and analytics technologies support a unified operating model?
Governance
- What governance frameworks are needed to ensure independent oversight and challenge?
- How can clearly delineated duties in the three lines of defense be established?
By integrating their cybersecurity and fraud units, and eventually unifying all risk functions related to financial crimes, banks can attain a more holistic view of customer risk, reduce operating costs, and enhance the effectiveness and efficiency of their risk management efforts.