Why risk assessments matter
An effective financial crime risk management program addresses the Bank Secrecy Act, anti-money laundering, Office of Foreign Assets Control sanctions, and fraud. One of the foundational components of such a program is the risk assessment, which helps financial services organizations consider the extent to which potential events and new product offerings could affect their risk profiles.
Organizations need effective risk assessments to manage resources and make informed business decisions that enable growth. Performing an effective risk assessment means going beyond an annual, check-the-box activity by implementing a risk assessment process that can yield actionable results and findings and serve as a business intelligence tool to inform risk management strategies.
In today’s rapidly evolving market, banks, financial services companies, payment services providers, and fintechs are focused on improving their processes to create dynamic and efficient digital experiences for their customers. But the improvements do not extend just to customers. Compliance and risk management professionals can improve and enhance their critical corporate governance and risk management processes to make them more efficient, integrated, and collaborative – all of which supports business growth.
How technology can improve the risk assessment process
To become and remain competitive, financial services organizations need to enhance the efficiency of their periodic financial crime risk assessment process to better guide compliance and risk management initiatives that support their market offerings. The challenge is that many risk assessment practices are inefficient and contain a high number of manual processes that are not repeatable or sustainable.
By integrating technology into the risk assessment process to do things better, faster, and with reduced cost, organizations can achieve the following:
- Actionable risk intelligence that supports sustainable growth by identifying opportunities to reduce or take on more risk
- Increased productivity by reducing the level of effort required for data collection and validation
- Demonstrated, strong governance of their program’s risk
- A secure, collaborative environment that fosters real-time information sharing between risk management functions and business lines
Technology-enabled solutions – which support the automated or semi-automated collection of data, scoring of inherent risk, mapping of controls, and scoring of residual risk – can help organizations streamline and add efficiencies to their risk assessments and provide a better understanding of real-time risk than the frequently outdated, once-a-year process can. Organizations then can use the valuable business intelligence obtained through the risk assessment process to increase revenue and identify new business opportunities for further growth.
Benefits of a technology-enabled risk assessment process
A technology-enabled risk assessment yields advantages over a manual process. Such benefits include:
- Collaboration. Multiple users have access, even remotely, and they share core data and controls.
- Consistency. A standard approach applies for the collection of data and ratings process, and all risk outcomes are tracked and auditable.
- Efficiency. Risk rating and control impact updates can be accessed through a click of a button, and direct report outputs can focus on results instead of the effort to complete.
- Sustainability. A technology-enabled assessment provides visibility to period-over-period trending and can align with changing regulations and operational needs.
What to look for in a technology-enabled solution
Organizations that want to implement a technology-enabled risk assessment process should consider several key functions in their evaluation of potential solutions by reviewing specific categories and questions such as:
- Rating description. Does the solution use both common language and numeric values?
- Weighting. Does it include additional weighting for significant customer growth or a significant number of new products and services offered?
- Risk exposure. Can it support the level of granularity needed to truly understand the organization’s risk exposure on several levels: individual, category, line of business, and enterprise?
- Multiple assessments. Can it support multiple risk assessment processes, such as anti-money laundering, sanctions, compliance, and fraud?
- Reporting. Does the solution export an executive summary view (such as for a board-level audience) while still being able to drill down and analyze risk at a granular level, where needed?
- Trending. Can it determine if the risk is stable, decreasing, or increasing?
- Forecasting. Is it able to include analysis of customer types or product and service offerings that are not currently in scope but could affect risk levels if onboarded or offered?
Looking toward the future
An effective financial crime risk assessment process should evolve as an organization changes, grows, and reinvents itself over time. Toward that end, a technology-enabled risk assessment process can help organizations establish a forward-looking approach that checks the box from a compliance perspective and provides meaningful intelligence for the investment of dollars and personnel to enhance controls.
A technology-enabled risk assessment process can help focus intelligence on opportunities to reduce or take on more risk. It can be rapidly deployed and executed, and it establishes a repeatable, sustainable process. By targeting preparation to help organizations understand their past, present, and future exposure, a technology-enabled risk assessment process surpasses the outdated mode of check-the-box activities, and it can deliver actionable results and findings to support the organization in making timely and informed business decisions.
