The 5 Non-Negotiable Tech Ingredients to Successful Customer Risk Management

As we observe the global financial pressures, rapid changes in geo-political situation, ESG, and the Web 3.0 (with NFTs, DeFi, AI, the Metaverse, crypto and open blockchain) continue to morph and evolve, big shifts and new opportunities are shaping the financial services industry.

Here are the 5 tech essentials that leading brands in financial services will prioritize in the next 2-3 years to manage customer risks more efficiently and effectively:

1. RISK MONITORING ENGINE 

The first foundational tech capability to optimal customer risk and due diligence management is enables a risk-centric approach, indispensable for truly proactive risk management practices.

Lengthy checks, intrusive back-and-forth with the customers, lack of transparency, manual and paper-based activities are not only affecting a firm’s ability to spot and manage risk appropriately, but they break the customers experience too.

Banks need to cut down on the risk management cycle times.

For better accuracy and for countering customers’ churn.

With a Risk Monitoring Engine, compliance and risk officers can leverage a true “one-stop shop” tech module that assists financial firms in staying continuously secure and compliant in an ever-changing risk space, accelerating the customer due diligence and alerts & investigations management processes, while reducing the costs of operations and compliance.

Financial firms can leverage a Risk Monitoring Engine to codify both business rules and compliance, as necessary. Things that staff must be trained to do, can be automatically applied against the available data, and even enhance it, so when staff needs to make a decision, it is all available at their fingertips, eliminating the need for ‘swivel-chair’ access across multiple systems.

2. DATA

The weight and sophistication of money laundering paradigms and the increasingly shorter shelf-life of regulatory requirements, increase the obligation to check on an ongoing basis that the financial institution is managing risk properly and complying with the laws of each country where they operate.

Paramount to being able to do so is strong data quality, and accessibility. With that, compliance, operations and investigative teams can spend their time on examining and decisioning the risk, rather than spending time gathering information that is used for their analysis.

Data Quality

Right the first time: It all starts with the right data being captured during prospecting, client onboarding, first KYC and due diligence profiling, and their later enrichments.

The right technology tools will guide users in the gathering of the needed content, in the needed format.

Once collected, that data will be leveraged across the board to drive the right products and services proposal, decisioning and approvals. Preserving the context of each piece of work throughout the entire workflow lifecycle - as work moves across departments- helps large organizations integrate, automate, and improve their complex front- to back operations.

Data Availability

Consistent across the board: Firms need to insulate users and customers from back-end complexity and intelligently automate the pulling of third-party data, leveraging internal as well as external data sources. The right technology sits at the heart of an organization’s technology stack and plays agnostic about where data comes from and where it ultimately resides. Technology helps financial firms to take that data, from wherever it comes and process it, with as much automation as possible to get it to where it needs to be, across channels and systems such as a CRM, a Master Data Management system, a data lake, or multiple silos of the same.

In summary: first, get data right and available. Second, make insights actionable.

3. UNIFIED CASE MANAGEMENT

In today's world, there’s little tolerance for disconnected approaches to work. The good news is there have been advances in how to manage all the risk and compliance work end-to-end, and it’s called case management.

In a nutshell, case management is a software-based approach to managing a set of processes that collects, tracks, and consolidates data to achieve a business outcome. It’s a unified context of your process, logic data, and intelligence, and when fully integrated, the result is a dynamic ecosystem of work that reflects the environments in which it’s done.

Looking at customer risk and due diligence management, beyond taking a best of breed approach to detection and monitoring, banks need to leverage the detection output from these systems into a unified case management system for AML, AFC, sanction alerts and cases.  Although these alerts and cases may be worked independently by the respective units, a unified case management tool not only allows for a consolidated view of customer risks at entity level, but -most importantly- provides with the ability to increase STP where applicable, while seamlessly orchestrating the very needed actions and competences to address that particular risk matter.

4. COMPOSABILITY

Gartner predicts that by 2024, growth of automation marketplaces will propel 80% of large enterprises to pivot to principles of composability, to minimize operational independencies, and maximize the value of their hyper-automation initiatives.

Composable business, a term first popularized in 2014 to showcase the transformative power of cloud computing on enterprises, has re-gained traction since the start of the pandemic.

It means combining agile business models with digital technologies to adapt to any market needs, customer needs, and internal enterprise needs.

It’s all about assembly rather than build. How you leverage ecosystems. How you leverage assets that you bring together and combine in novel ways.

Decades of process changes and system evolutions have left financial institution teams, workflows, and applications intertwined. As a result, businesses often find themselves full of swollen business processes and applications with too many competing purposes, and struggle with:

• Slow change
• Many interdependencies
• Scaling
• Innovating

Financial firms need to rely on technology that allows them to design and implement their most complex processes across their organizations in the most efficient and reusable manner.

5. BUILD FOR CHANGE

The only constant is change!

Business history is littered with cautionary tales of companies that lost customer focus as they grew and firms that couldn’t keep pace with nimbler competitors.

Were these companies blindsided by change? Some were, others knew what they had to do but couldn’t pivot.

Today’s continuous evolution forces financial firms to get hold of solutions that enable them to quickly adapt to sudden shifts, and to truly become resilient to future changes.  How does technology cater for that?

From operational tweaks to profound enterprise transformations, intelligent workflows built on a collaborative, low-code platform with AI-powered decisioning provide excellent change management capability.

Low-code platforms and modern, layered architectures give financial firms the tools to work smarter, adapt with ease, and accelerate digital transformation.

A highly configurable system that does not require coding or coding abilities to make changes

• powers easy management of variations, and
• reduces complexity, while enabling reuse

Closing thoughts

As forward-thinking leaders in the industry are consistently pivoting to continuous and holistic risk management frameworks, these 5 tech essentials will inform and guide the tech-buyers agenda in the customer risk and due diligence domain for at least the next 2-3 years.

The imperative is becoming agnostic to the various detection and monitoring systems, while increasing resilience, velocity, and effectiveness thanks to modular, highly configurable, and scalable technologies.