Evolving Bank Risk Monitoring and Controls Through Technology

Risk monitoring and controls exist in any organization that manages its risks, but they are often being handled inefficiently. These inefficiencies compound and can result in enforcement actions, reduced profits, and much more. There is a need to overhaul the whole risk management framework to make it more efficient at detecting, mitigating, and monitoring risks.

There is often a lot of frustration attached to the risk management functions in an organization. A mistake in managing risks can have significant consequences for an organization which is why risk management is a critical function for organizations. The problem is that while it is very important to manage risks, it is also very complicated to manage them.

Risk Monitoring Challenges

Monitoring risks is an essential part of risk management. The process is often handled manually in smaller organizations. The risk manager is given the responsibility to monitor all the risks affecting the business but often do not have adequate tools or technology to help them monitor risks. Most risk managers use off-the-shelf productivity solutions like Word and Excel to keep track of all the information they have and make updates as new information comes in. There are many challenges and obstacles inherent in this approach.

Lack of continuous monitoring

It is not possible to continuously monitor all risks that affect the organization continuously. Imagine how many employees a business would require who would be dedicated with spending their whole day monitoring the multiple risks that affect the different business units within the organization. Most organizations usually check for updated risk reports periodically.

Gathering data is a time intensive task

Risks can only be monitored if updated data about the risks is being provided to the risk managers. This is an area where every risk manager is aware of the frustrating nature of the work. Managing risks is the first priority for the risk department, but other department have their own different priorities and may not be as proactive about risk data as the risk department wants. This means that gathering the data that powers risk reports takes a lot of time, which in turn means that the latest risk data is not being monitored.

Creating reports delays the process

Risk monitoring, in business environments where it is being handled manually, depends completely on risk reports. The risk department needs risk reports from each business unit so they can build an enterprise level risk report with risk tracking. There are two delays present in this process; the business units need to manually collect all risk data to create reports, then the risk department must collect and verify all the risk reports to collate them into one enterprise level document. Both of these processes add many days to the process which creates a gap between the actual risks affecting the organization and the outdated risk data which was used to create the risk reports.

Control Management Challenges

Controls are the primary strategy used by businesses to mitigate or eliminate enterprise risks. Managing these controls is also a complicated process. There needs to be a control that manages every known risk within the organization and each control must be tested to ensure that it is performing efficiently under adequate parameters. There are often multiple risks being mitigated by one control and there are also multiple controls dedicated to a single risk. Managing this infrastructure of controls quickly becomes an inefficient task when being handled manually.

Limited monitoring and testing

Think of the controls as the dam that limits the waters of risk from overflowing and causing damage to the business. It is crucial that the business keeps watch on how efficiently these dams are working. The problem is that the administrative workload in monitoring and testing multiple controls in collaboration with all the business units of the organization is too much. No business can sustainably do continuous monitoring and frequent testing of the controls using manual processes.

Control taxonomy

There is often a lot of confusion about controls among the different departments. It isn’t unusual to discover that the same control was being used by two different departments, but it was listed as two separate controls because both departments referred to it by a different name. The risk department must do an in-depth assessment of all controls to ensure that mistakes like this are corrected.

How risk management technology overcomes the obstacles

There are a lot of inefficiencies in the risk monitoring and control process, but they can be removed with the help of risk management technology. You can accomplish this with a risk management solution or a tool that has been designed for risk monitoring and control management. Here is how each challenge is addressed by risk management solutions:

Risk Monitoring Challenges

• Lack of continuous monitoring is no longer an issue because the technology can monitor all risk data 24/7
• Gathering data is no longer a time intensive task – all business units upload risk data to the same risk platform and this data can be accessed in just a few clicks
• Delays in report creation are minimized or eliminated. A lot of reporting is completely automated by the solutions. Manual reporting is also much faster because all the data required for creating reports has already been standardized and made available in one location.

Control Management Challenges

• Limits on monitoring and testing controls are no longer an issue once a risk solution has been implemented. All the menial and administrative parts of the process are automated or eliminated
• Control Taxonomy issues are completely eliminated because risk and control monitoring solutions include a built-in taxonomy. Instead of naming controls themselves, the departments select the names from an approved list, ensuring that the same nomenclature is in effect all across the enterprise.

These are just some of the solutions that can be solved by enterprise risk management platform. Want more details on how these solutions can help your organization? Get in touch with our team to find out