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How Banks Are Using Enterprise Risk Management Systems to Improve Efficiency and Accuracy

How Banks Are Using Enterprise Risk Management Systems to Improve Efficiency and Accuracy

Enterprise risk management software platforms are designed to target vulnerabilities, neutralize threats and reduce risk levels. Banks and other financial institutions face a diverse, dynamic range of risk factors and many cannot be fully eliminated or mitigated, although, with the right strategy, they can be effectively minimized and managed. That said, you can also see other benefits, such as improved accuracy and greater efficiency.  But how does this kind of risk management software lead to improvements in this regard? 

How ERM Software Improves Efficiency and Productivity With Policy and Procedure Reviews

Enterprise risk management — also called ERM systems — offer a number of tools that can lead to improved efficiency and accuracy across all levels of an organization’s operations. You typically perform a comprehensive review of various processes and policies as part of the ERM software implementation process. 

This assessment serves as a great opportunity to evaluate processes and their overall efficacy. In cases where shortfalls and inefficiencies are identified, you can overhaul those processes to bring about improved productivity. This brings benefits because often, processes are implemented and adapted over time, with little thought given to maximizing performance and optimizing workflows. This leads to inefficiencies that tend to compound over time. Periodic reviews such as this can be very effective in not only raising productivity levels but also making changes that will reduce risk and minimize vulnerabilities.  

How ERM Software Improves Accuracy With Monitoring Tools

ERM software systems typically include monitoring tools that are designed to raise the alarm when threats or vulnerabilities are detected. Many of these risk factors and vulnerability points also represent areas of inaccuracy or inefficiency. For example, a risk management software system can identify errors in a company’s financial documents, like employee-submitted tax documents or data flows that are required for achieving and proving regulatory compliance. This monitoring can help the financial institution to avoid problems down the road, but it also provides an opportunity to correct the error and improve accuracy in the short term. 

How Enterprise Risk Management Software Improves Efficiency With Data-Driven Decision-Making

ERM software platforms are typically configured to collect vast amounts of data, which is then used for monitoring, auditing, and reporting, amongst other things. This data can easily be pulled into reports and data visualization tools. The information can then be used for data-driven decision-making at all levels throughout the bank. Banking managers, for instance, can leverage this data to develop new, more effective policies and processes. And since you’re using data as the primary basis of your decision-making process, you effectively maximize your chances of success right out of the starting gate. This is achieved by: 

  • Monitoring and planning for variabilities in future performance;
  • Protecting the bank’s interests from sustaining an unacceptable degree of loss; and
  • Pursuing potentially-profitable opportunities by strategically leveraging core competencies that distinguish the bank from its competitors. 

Risk management tools provide a data-based guidepost of sorts for decision-making, providing banks with a leg up on the competition in a potentially volatile and fast-evolving industry. When data is properly leveraged, efficiency and productivity levels can be improved dramatically to reduce risks, neutralize threats and minimize vulnerabilities in a way that will bring about better, more profitable outcomes.

ERM Software Improves Efficiency and Accuracy Through Effective Regulatory Compliance Measures and Monitoring

ERM software often includes tools that are designed specifically for banks that are seeking help to establish and maintain regulatory compliance. The financial sector is subject to some of the most stringent regulatory oversight that you’ll encounter in any industry. What’s more, banks are vulnerable to fines and penalties that are so significant that a single fine can prompt a financial institution to close its doors. Consider the eleven major banks that were collectively handed $1.8 billion dollars worth of fines by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) after they were found to be violating record-keeping laws. These precedent-setting fines were issued after it was allegedly found that these banks were allowing employees to use consumer-grade messaging apps — like WhatsApp and iMessage — to communicate with clients and customers. These instant messaging apps lacked the necessary tools that are required to export and retain messaging data in a manner that’s compliant with record-keeping laws. The result: hundreds of millions in fines for each of the eleven banks — a sum that could force a smaller institution to close its doors. 

Legal and regulatory compliance burdens are significant for financial institutions. The very act of becoming compliant can go a long way toward helping a bank to overhaul its processes and policies — especially those related to data collection and data management — in a manner that improves efficiency,  accuracy, and even security levels. In short, the improvements and changes that are required for regulatory compliance can bring benefits to many other areas of a company’s operations as well. 

Additionally, many enterprise risk management software systems feature monitoring tools that are designed to help a bank monitor the regulatory compliance landscape. For instance, you may have multiple integrations in place to allow for data flows that are leveraged as part of the bank’s efforts to maintain regulatory compliance. If one of those data flows is interrupted and cut off, you could find yourself in a bad situation both in terms of compliance and in terms of data collection and data retention in general. Fortunately, an ERM platform can alert you to the issue early in the game, allowing you to take immediate action with the deployment of corrective measures. As a result, you can avoid data collection gaps and other issues that could adversely impact regulatory compliance and other systems that leverage data. The end result: better accuracy, improved efficiency, and avoidance of the staggering fines and penalties that can arise from non-compliance. 

Using Enterprise Risk Management Systems to Improve Efficiency and Accuracy

Overhauling policies and streamlining processes. Leveraging the bank’s data to drive data-driven decision-making. Taking advantage of ERM monitoring tools and actively monitoring for regulatory non-compliance. These are just a few of the ways that banks are using enterprise risk management systems to improve efficiency and accuracy throughout the entire financial institution. The benefits are many and varied, bringing a major leg up on the competition for banks that opt to pursue these measures. This serves as a great example of how today’s dynamic risk management landscape can spur improvements and changes across an entire industry. 

At iTech, we specialize in enterprise risk management solutions, leveraging emerging and innovative technologies to provide our clients with a competitive advantage. Our goal is to generate a solid ROI, with improvements to a company’s processes, productivity levels, and overall profitability. Whether it’s a process automation project, enterprise software development, or integrations that allow for improved data management capabilities, iTech’s digital transformation projects are designed to solve problems and resolve the many challenges that our clients confront on a regular basis. We invite you to contact the iTech team today to discuss your bank’s enterprise risk management strategy. Then, we’ll collaborate on the development of a digital transformation strategy that will help take your financial institution to the next level of success.