Inventive Operational Risk incidents lead to major business turmoil
Risk management has always been a complex task for banks. Today the scope to meet regulatory requirements in the risk management function has become even more sophisticated. With new threats arising from recent developments, such as increasing cybercrime or data security requirements, the banking sector is facing additional, one could say “modern” challenges in the area of Non-Financial Risk (NFR).
We are increasingly witnessing incidents related to new areas that are linked to recent technological developments and trends. Beside the classic Operational Risk incidents (e.g. bribery, money laundering, errors in transaction execution, financing of terrorism and fraud related to insider trading) those incidents are being revealed due to increasing regulatory requirements and disclosure obligations, causing additional reputational damage due to their rapid dissemination in the media.
Capgemini Invent has expertise in the delivery of data science use cases leveraging the whole potential of non-financial risk data. Artificial intelligence (AI) is used to gain operational efficiency, reduce risk costs and evolve the Operational Risk department from being reactive to a function that proactively adds value to the business (Risk As A Service).
With the help of natural language processing (NLP) techniques, we help financial institutions to build a dynamic and robust taxonomy of risks. The same AI techniques are used to automatically classify and link internal and external (i.e. ORX, SAS databases) incidents.
These data-driven use cases leverage internal and external data to bring more intelligence into the Non-Financial Risk framework:
- Build predictive models and Key Risk Indicators
- Help weak signals detection
- Empower root cause analysis
Capgemini Invent can help you prepare for regulator inspections and streamline your Operational Risk framework
With the experience of over a hundred EMEA-wide customized workshops conducted with different business units (from front to back office), we have developed an optimized toolkit for assessing operational risks and controls. This includes an exhaustive risk taxonomy, control coverage assessments and a library of potential incidents. The Capgemini Invent benchmark study, conducted with a panel of international banks, gives us both knowledge and a platform especially for COOs and Non-Financial Risk managers. It was established to share knowledge and recommendation management.
Given the new NFR environment we see a strong need for a change to proactive management and mitigation of risk, rather than an event-based response. The Capgemini Invent approach is based on actual needs and incorporates an integrated assessment and management of Operational Risk.
The utilization of our toolkit generates an optimal basis for the creation of comprehensive control plans, facilitated by Capgemini Invent’s expertise in a broad portfolio of services. The uniform data base and an extended incident collection are also an imperative requirement for the upcoming Operational Risk standard approach (becoming effective on January 1, 2022). As a trusted partner to many banks (European and globally), our conviction is to improve the RCSA management as the backbone of operational risk. This helps business and risk functions to take better actions based on entity risk appetite and operational losses distribution.
We have developed data-centric approaches and use cases to build a Non-Financial Risk framework empowered by fresh data to better reflect key risk areas, related controls, their latest results in each perimeter and the follow-up of action plans. Capgemini Invent developed a use case around a dynamic RCSA mechanism, covering the assessment phase to the unique consolidation of risks at every organizational level.
Selected Operational Risk Use Cases
- The Dynamic Risk and Control Self Assessment (DRCSA) leverages modern technologies during the RCSA process
- It automatically generates an individualized set of risk and control libraries based on real-time auditing results
- Selected benefits include: Reduced manual, repetitive workload & provision of real-time RCSA results
Weak Signals Analysis
- The Weak Signals Analysis tool spots a company’s most recurring operational risks, materially-relevant topics and related causes based on incident descriptions
- It contributes to improved detection of emerging risks and provides experts with valuable content to help define Key Risk Indicators (KRIs) and strengthens anticipation capabilities
- Selected benefits include: Detection of risk drivers and emerging risks & faster KRI definition based on inputs provided by smart topic extraction
Taxonomy Rationalization & Classification
- The Taxonomy Rationalization & Classification tool automatically classifies operational risk incidents into an internal taxonomy of risks based on incident descriptions
- It provides advanced exploration and visualization capabilities to assist risk managers’ analysis in the internal/external data analysis and for better assessment of operational risks
- Selected benefits include: Automation of repetitive and time-consuming tasks & benchmarking of relevant metrics to create intelligent results