“Fear is Risk Management without Analytics”, a wise quote displaying how the fear of not knowing what is to come can be alleviated by the ability to use troves of valuable data to make informed decisions. A dynamic economic and regulatory environment presents new challenges for businesses to protect their market positions and bottom lines. Risk analytics helps businesses navigate these challenging waters to avoid unexpected events and regulatory issues.
Risk analytics has ridden the technological tsunami over the past decades of data science’s impact on creating new ways to see the future through use of quantitative data. Artificial intelligence and telematics are ways companies are collecting data that can be analysed to discover adverse emerging trends or inefficient business processes that have an opportunity for performance enhancement.
Real Time Situational Awareness
As data flows into risk analytics systems (e.g., RMIS), managers gain the ability to evaluate data in real time, looking for trends or opportunities. These processes and systems can provide situational awareness of all vulnerabilities requiring monitoring, to ensure they stay within an acceptable risk level. Risk analytics can provide these benefits, from the boardroom down to upper management.
Measuring Risk Response Effectiveness
When resources are deployed to control an identified risk source, it is good practice to manage and measure the effectiveness of the controls in place. This is to answer the question, “Is the capital and workforce allocated to treating this risk source being used efficiently?”
Risk analytics can measure control effectiveness in real-time, keeping management informed on whether controls are working as forecasted, or if discussions need to occur, or a change in treatment strategy is required.
Model an Uncertain Future
Risk analytics, armed with the power of data-science provides the opportunity for forecasting into the future, to see what may lie ahead – and plan accordingly.
Every business leader would like to see into the future, to see how things may play out to move the business forward, once a decision has been made. The financial-forecasting companies conduct on risk is the same that may be implemented for non-financial companies. This can provide quantitative models to assist in decision making processes. For example, stress testing processes generate scenarios that can be studied to see how they impact the market and business’s bottom line. Models like this will only continue to be fine-tuned as technology progresses and more data is accumulated over time.
Meeting dynamic regulatory requirements
For global businesses, keeping up with ever changing regulations can be quite a task. No business leader wants to run into compliance issues that can derail plans and increase expenses.
From GDPR to HIPAA, risk analytics systems can assist with managing regulatory requirements and ensure data is collected in accordance with established protocols. Measuring compliance-related performance, business leaders have the data to identify opportunities for process-improvement involved in meeting regulatory and legislative requirements.
Creates a Mission Control for the Board
With companies collecting more and more daily data across all business units, risk analytics can pull data together using AI. This keeps risks visible to senior leaders and boards. Risk dashboards allow customised visualisations of measurements and identified strategic risks.
Risk sources are easier to deal with when they are out front – not sneaking up from behind.
With established risk metrics, leaders can see in real-time how their business units are performing, after ensuring decisions being made are within risk appetite levels set by the board. This is a new power that is a value-add for any organisation’s board room. The ability to turn data into actions that push back against risk events will keep the business on course.
