Companies that want to stay competitive in today’s fast-paced world need to stay on top of a number of business imperatives – ranging from customer care to compliance, from forecasting and planning to forensic auditing. Business intelligence is rapidly becoming the cornerstone for applications addressing these and other challenges – including arguably the most critical one of safeguarding the company and its information assets through efficient risk analysis.
Business intelligence, traditionally a niche application to be used only by the very top echelons of corporate decision-makers, has come of age and turned itself into the vital foundation for any number of business-critical applications.
Change is the only constant in business today, with factors both in and out of anyone’s control exerting new and complex pressures on organisations across the globe.
For organisations in the financial services sector, especially, myriad changes are forcing them to re-assess the way the look at and manage risk.
Governance and new regulations are just the tip of the iceberg, but are probably a good place to start, says Andre Zitzke, risk product manager at SAS Institute.
“There is a huge amount of buzz around risk and how to bring everything together to manage it,” he points out.
Since South Africa is a signatory to the Basel II accord, local financial institutions are investing more of their compliance budget in implementing the requirements of that agreement.
Organisations are looking to technology to provide a comprehensive risk data model that facilitates the development of a single customer view.
This system needs to be efficient and scalable, while avoiding duplication.
A major problem in this process is that a proliferation of risk technology solutions have made their way into the market and most organisations have several running, in various departments.
Any solution needs to consolidate multiple risk platforms and related environments, including direct access to the ERP system, while providing advanced analytic and reporting capabilities.
“You need to get data from all the different risk systems – manufacturing, credit and operational risk – and use the business intelligence system to create an enterprise view,” says Zitzke.
Alternatively, companies can implement an integrated risk technology platform which draws data from all the relevant sources into a single view.
Once an enterprise view of the organisation has been attained, companies can start analysing, identifying and managing risk.
Sophisticated analytics are required at this level, together with complex mathematical models specific to each organisation’s scenario.
These models need to take into account an organisation’s risk appetite as well as the various ways it transfers and mitigates risk.
However, Basel II compliance is just the start of the risk management process for many organisations, says Zitzke. Financial institutions should be using the investment to address other critical issues within their organisations – issues such as Anti-Money Laundering legislation as well as new accounting standards and internal governance requirements.
“Specifically in the retail arena, being able to understand what drives customers to default can greatly assist in adopting and enhancing strategies to attract better customers and to develop better customer-fitting products. With flexible technology, the same environment could be used to validate current score cards.”
The powerful analytics being put in place to address Basel II compliance can also be harnessed to provide aggregated reports that address all the various internal risk elements, Zitze adds.