Risk managers vulnerable to disruptive technology

15 May 2018 Consulting.us

Risk managers are on the frontlines as disruptive technology begins to make its presence felt across industries. Many are confident that their services will prove indispensable in adapting to disruption, but a new report asks whether the very same technology could ultimately make risk managers redundant and suggests urgent actions to be taken if they wish to remain relevant. 

The advance of disruptive technology comes as a multi-pronged attack. Artificial Intelligence, Blockchain, Big Data, and the Internet of Things present just some of the major disruptive elements that are set to radically transform the business landscape. Consultants play a central role advising clients on coping with, managing, and exploiting the coming change. They are joined in the strategic braintrust by risk managers, whose expertise in assessing the pros and cons of a new business venture, or external development, is valued by leaders.

Yet new analysis from Marsh – a leading risk management consultancy – and RIMS – a not-for-profit risk management society – questions whether risk managers will enjoy a seat at the strategic table for much longer. Conducting their 2018 Excellence in Risk Management survey, the two organizations held focus groups and gathered responses from 450 leading risk executives. With the results they compiled a report of significant importance to the industry, titled ‘Maintaining Relevance Amid Technology Disruption’.

Risk managers say they support innovation; C-suite slightly less so

The first key finding is that, while risk executives are bristling with confidence regarding their continued importance to their firm, the feeling is not mutual among C-suite leaders. A large majority of 87% of risk professionals said risk management in their organization supports or promotes innovation. Just 63% of C-suite respondents felt the same way. A substantial 17% of C-suite executives viewed risk management as provided a “needed brake” on innovation, compared to just 2% among risk professionals. 

More alarmingly, just 14% of respondents said they “strongly agreed” that their company had a clear process in place for dealing with the risks emanating from disruptive technology. Almost half (48%) either couldn’t say for certain whether a strategy was in place, or actively disagreed.

Unease around addressing disruptive technology risks

The authors argue that risk professionals are evidently missing a unique opportunity to stake out leadership positions in helping direct how disruption is managed. To assume this leadership role, they must do more than familiarize themselves with the terminology, but develop serious expertise, so that they can lead a conversation on the emerging risk of AI and what the company can do to manage it. 

By boosting their knowledge of specific digital trends, risk executives will be better positioned to contribute to senior leadership discussions about digitization - the broad term which, for some, encompasses almost all technological change and disruption. Risk professionals were asked what ‘being digital’ meant to their company, in order to gain a better appreciation of how they viewed such developments.  

Operational efficiency tops growth

Around 60% said that ‘being digital’ meant improving their capacity to meet customer expectations. Almost half agreed that it involved implementing technology to boost operational efficiency. Lower percentages associated ‘being digital’ with growth, such as enhancing their external reputation (10%), or doing business in a way which attracts more customers (32%).

This was followed up with respondents being asked to identify the three most interesting benefits they would hope to gain from accessing new technological tools designed to improve their own performance in identifying and managing risk. ‘Identifying emerging risks’ and ‘enhancing data security’ were the top two most sought-after benefits, closely followed by ‘improving emergency response and crisis management’. 

Respondents offered the broad hope that any technological addition to the risk management business would help them extract value from the huge volumes of data now at their fingertips. This offers unprecedented opportunity but also makes modeling the magnitude of the risk an extremely difficult challenge. Technology which advances analytic insight and can scour through immense datasets while highlighting only the most vital information is the industry’s Holy Grail. 

Risk executives seek tools to help with risk identification, management and finance

Yet technology which can accurately identify any and all risks on the horizon and draw up efficient and bulletproof response models would presumably replace the flawed humans currently in charge, or at least reduce their numbers. This is why the Marsh and RIMS report advises risk professionals to carve out a new niche for themselves as part of the leadership team discussing technology adoption. 

Despite being overshadowed in the analytics sphere, risk executives who are ahead of the curve on technology and market trends can help their firm develop strategies to manage both, with an emphasis on reducing risk. Cross-functional risk committees set the stage for precisely this kind of input from risk executives in strategic discussions around technology. 

Yet only a slim majority of 61% of respondents said their firm had such a cross-functional risk committee. Then, among those who answered ‘yes,’ a similar margin of 60% said disruptive technology was on the agenda “occasionally” – compared to 31% for “always” and 9% for “never”. Among those who answered ‘no,’ 35% said that their company should have a cross-functional risk committee in place, 39% said they conducted informal meetings instead, and only a small group of 8% said there was no need.

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Software firm NICE Actimize launches financial crime consulting practice

28 January 2019 Consulting.us

NICE, a provider of technology solutions, has launched a financial crime consulting practice that falls under the NICE Actimize brand. The arm is led by US-based company veteran Chad Hetherington, and provides advisory and execution services on the full range of financial crime operations.

Globally, more than 22,000 organizations in more than 150 countries, including more than 80 of the Fortune 100 companies, are using platforms and solutions from NICE. The NICE Actimize platform supports global financial institutions and regulators in financial crime prevention, such as fraud identification, anti-money laundering detection, and surveillance concerns such as payment fraud, cybercrime, sanctions monitoring, market abuse, customer due diligence, and insider trading. 

Leveraging its extensive experience in the field, NICE Actimize has extended its portfolio with management and digital consulting services. “Financial institutions are continually facing new regulatory and financial crime risks, and as a result operational compliance staffs have ballooned over the past decade. In a world of increased regulatory reporting, financial crime, insider trading, and more unknown risks, institutions are looking to leverage today’s technology, reduce costs, and protect their brands,” Chad Hetherington, global vice president of professional services and the head of the Financial Crime Enterprise Consulting & Advisory (eCAP) unit, said. 

According to an estimate by Thomson Reuters, financial crime costs the global economy $2.4 trillion annually, with the amount projected to increase in the years ahead. Despite spending approximately 3% of their turnover on battling it, “organizations are clearly struggling to curtail financial crime,” David Craig, an executive at Thomson Reuters’s Refinitiv. said. “Inefficient, costly compliance processes are simply inadequate when it comes to screening,” and as a result spending on third-party expertise is on the rise. Consulting in the area of risk and compliance last year represented 5% of US’s $58 billion consulting industry, with the segment one of the fastest growing areas in the landscape. 

Asked about NICE Actimize’s track record in advisory, Hetherington pointed at the firm’s nearly two decades' experience working with financial institutions of all sizes in implementing financial crime solutions across anti-money laundering, anti-fraud, market surveillance, and compliance. “We have worked with hundreds of our customers implementing NICE Actimize’s portfolio of financial crime and compliance solutions. Our eCAP unit offers the depth of experience gained from these engagements and continuous learning in the field," he said.

NICE launches financial crime consulting practice

“We have already consulted on a range of issues, including: Robotic Process Automation (RPA) operational assessments and business case ROI evaluations; alert tuning and optimization; end-to-end investigation observations for operational enhancements; technology eco-system evaluations; enterprise consultancy to align business and technology roadmaps and infrastructure; and adoption of cloud technology," he added.

Tackling financial crime and compliance

Alongside the firm’s financial crime expertise and heritage with clients, the eCAP arm will enable results delivery through its proprietary "Financial Crime Target Operating Model." “This methodology is at the heart of our approach and is designed to pinpoint objectives, create a meaningful technology roadmap and establish a strong enterprise operational plan," Hetherington said. Similar to other areas of operations, a Target Operating Model (TOM) is key for ensuring an effective rollout, with a TOM providing the contours on which to build financial crime programs. 

“eCAP works with clients to evaluate all aspects of their financial crime programs – not just process and technology, but also people. Inefficiencies are identified, with guidance provided to help reduce costs and improve the effectiveness of financial crime programs. Our holistic approach addresses all financial crime technology implementation and compliance related integration matters and outlines the best business and technology operational practices across the enterprise," he said. 

Building on first-hand access to NICE Actimize’s technology backbone – the new consulting firm will enable clients to “stay on top of developing technologies such as artificial intelligence and robotic process automation, as well as create best practices for operational excellence and utilization of cost effective techniques,” Craig Costigan, who leads the NICE Actimize suite, said.

NICE is positioning the consulting arm as an independent player, providing support to both NICE Actimize user groups as well as non-NICE clients. Led from New York, the Financial Crime Enterprise Consulting & Advisory wing will serve customers globally. The team consists of consultants, subject matter experts, analytics experts, software engineers, and solution architects.