Understanding the Different Stages of Risk and Compliance Management

Technology changes not in an instant but in waves. Whenever there is a majorly disruptive technology, it is followed by waves of innovation in all fields and domains as the new technology is slowly used to its full potential. This can also be seen in the way risk and compliance solutions have evolved over time in response to the available technology. Additionally, it provides insight into the evolution of risk and compliance over the next decade.

When humans first began to navigate the oceans and seas, it had a profound effect on our culture, as international trade brought diverse cultures and items together. Similarly, trains and airplanes not only facilitated faster travel, but also altered the way we work and live. As distances shrunk, businesses expanded, people gained the confidence to travel wherever they needed to, and commerce expanded from national to international borders.

The impact of information technology on society and commerce has been strikingly. Computer systems were initially used to store and analyze data. However, with the advent of the internet, computer systems became much more capable. It began with communication, but everything is now powered by the internet and the powerful computer systems that serve as the internet’s backbone. What effect has this on risk and compliance technology, and where it will be in few years? Looking at the different stages of risk and compliance management makes it clear.

The Pre-Technology Stage

Risk and compliance have always existed one way or the other in most societies, but there were properly processed developed in the beginning of 20th Century. These processes could not depend on any technology, and all documentation was stored in papers. This meant it was difficult for management to have visibility over the entire organization and it was possible for there to be problems and issues that management was not aware of at all. While this was a major problem for businesses because it meant there were risks the business was not aware of, it might not result in a lot of fines or punishment by regulatory bodies, because it was even harder for regulatory bodies to investigate risk and compliance issues.

The Computer Stage

Computers proved to be fantastic at storing and analyzing data. The financial sector was one of the first commercial sectors to adapt computer systems to store financial data. This also helped risk and compliance managers across the world. They could now store data in digital documents and spreadsheets, and then use those spreadsheets to analyze trends. The capabilities of these systems were very limited compared to the systems we have today, but they were still a paradigm shift better than the manual methods that were being used before this stage.

The Internet Stage

The internet is what truly unleashed the full potential of computer systems in risk and compliance management systems. Before the internet, computer systems had only digitalized existing risk and compliance processes. The only difference was that the data was being stored digitally and being analyzed by computers. It still had to be collected manually. The internet made it possible for people to send each other information easily. It also made it possible to automatically capture risk and compliance data and feed it to a computer system that could analyze it. A few small businesses are still using this model – where they do most of the risk and compliance work manually using office productivity software like Word, Excel, and Outlook and communicate via e-mail.

The Transition Stage

We are currently in the transition stage of risk and compliance management. The technologies that are being used in the risk and compliance domain now are still nascent technologies. Once these technologies are fully mature, they will usher in the next stage of risk and compliance. A.I. powered solutions as a good example of transitionary technology. Since A.I. is still not a fully mature technology, A.I. powered platforms combine A.I. with streamlined workflows to deliver better performance.

The risk and compliance management platforms currently available easily outperform the best solutions that were available a decade ago. A.I. powered analytics and predictions enable businesses to not just monitor existing risk and compliance issues but also detect emerging risks and compliance issues.

The A.I. Stage

It is widely understood that once A.I. technology matures then it will end up disrupting in most existing SOPs and processes. A.I. solutions for risk and compliance will be able to automate almost all risk and compliance work. However, it must be noted that no one knows when the technology will be mature enough for such uses – it is possible that a breakthrough may be made in the next few years, or it may take decades. Many existing technologies such as neural computing networks are clearly predecessors of A.I., but true artificial intelligence has still been elusive.

Interested in seeing how your organization can use the best technology currently available to transform the way it manages risk and compliance? Get in touch with us for a demonstration of Predict360, the American Bankers Association (ABA) endorsed risk and compliance management platform.