How Custom IRM Solutions Can Help Banks Meet Regulatory Requirements

The financial business space is one of the most highly-regulated industries, with dozens of different legal requirements and regulatory oversight organizations creating a complex risk management landscape. These laws and regulatory requirements shape a financial institution’s processes, protocols, and practices, while simultaneously creating a sense of accountability. 

Regulatory noncompliance represents a serious liability in the realm of risk management, prompting banks and other financial institutions to implement measures that will promote regulatory compliance across the organization. The solution comes in the form of a custom integrated risk management platform, with an accompanying IRM strategy. 

What is Integrated Risk Management?

Integrated risk management or IRM is a set of processes and policies that holistically and organically promote reduced risk throughout an organization. Gartner aptly describes integrated risk management as practices and protocols that are, “supported by a risk-aware culture and enabling technologies, that improves decision making and performance through an integrated view of how well an organization manages its unique set of risks.”

IRM is often compared to enterprise risk management or ERM. When considering IRM vs ERM, you can think of ERM as a top-down strategy whereby you have an established set of policies and processes that are implemented across the business in an effort to reduce vulnerabilities and mitigate risks. IRM, on the other hand, is more of a bottom-up approach that focuses on more general risk mitigation goals. An ERM strategy focuses on a single set of objectives, whereas IRM strategies are rooted in a “single source of truth.”

Notably, integrated risk management is the newer, current term for governance, risk, and compliance or GRC. This is an important point to note since some technology such as IBM OpenPages is still branded as GRC software.  

How Do IRM Solutions Improve Risk Management for Banks and Other Financial Institutions?

IRM software platforms bring many benefits to financial institutions that are seeking to bolster their risk management and mitigation efforts. In fact, simply centralizing a bank’s risk management efforts around a single framework brings significant advantages. This is especially true for financial institutions such as banks and credit unions because these companies have such complex risk management landscapes, in large part due to their regulatory compliance burdens. The following is an overview of the benefits of implementing a custom integrated risk management solution. 

Reduced Risk Management and Regulatory Compliance Costs – Regulatory compliance requirements shape a financial institution’s policies, procedures, and processes. By implementing measures designed to achieve and maintain regulatory compliance, a bank will enjoy benefits such as improved security, more stringent data management processes, and better efficiency. In other words, the measures that are required to achieve regulatory compliance will bring other benefits that ultimately increase profitability and reduce risk management costs.

Improved Accountability – To achieve regulatory compliance, banks, and financial institutions are required to retain data and track how various data sets are used, managed, and accessed. This translates into improved accountability through reporting and auditing, amongst other measures. The reporting and auditing activities also serve as an opportunity to spot anomalies and errors that may signal a greater issue within the organization’s data landscape. 

Reduced Costs for Detecting Fraud and Cybercrime – With a custom IRM platform in place, you’ll have the tools you need to monitor for and detect fraud, cybercrime, and other events that can lead to losses. This can also apply to incidences of human error or even faulty process automation. A custom IRM platform can be configured to collect data and generate easy-to-understand data visualizations that clearly depict anomalies that may otherwise escape notice. Prompt identification of an issue will serve to minimize losses, while simultaneously reducing the cost of remediation.

There’s also the matter of improved decision-making capabilities. A custom IRM platform will stand as a real-time source for a financial institution’s data and metrics — perfect fodder for data-driven decision-making. With the right integrations, a custom IRM software platform can pull data from all regions of a bank’s digital landscape. This creates a broad, complete view that is ideal for business leaders, stakeholders, and other decision-makers who need an eagle’s eye vantage point. The net effect is improved business agility, arising as a direct result of improved, data-driven decision-making. 

Reputation Management in Custom IRM Software Platforms

Financial institutions such as banks and credit unions must seriously consider their reputation and the public’s view of the organization as a whole. Custom IRM solutions can be developed to include a module with reputation management tools. This positions a financial institution to monitor for and identify threats that may affect the bank’s reputation. This allows for rapid, decisive action if a problem is detected — exactly what you need to minimize losses associated with reputation damage. 

For example, your custom IRM platform may monitor database activity. One day, the system detects anomalous activity that’s associated with a data breach. This sort of event is highly problematic from a reputation management perspective. Customers are shaken when security is compromised and sensitive data is accessed without authorization. It’s extremely difficult to recover a sense of trust. Yet trust is extremely important when it comes to the institution that’s keeping your money. A custom IRM solution can empower a bank to spot the signs of a problem almost immediately. This can effectively limit the damage — including reputation damage — that occurs as the result of a data breach or other similar event. 

The Right Technology for a Custom IRM Solution 

A custom-integrated risk management solution can take many forms, with each platform developed to suit the bank’s strategic objectives and processes. The following is an overview of the most common IRM platform components and modules. 

• Monitoring dashboard – A monitoring dashboard can be customized with the data visualizations, charts, news, and updates that matter most to each user. An IRM dashboard will be configured to include all of the information a user needs to make data-driven and insights-driven decisions. 
• Reporting and auditing tools – Users can generate reports and perform audits of key data sets. Data visualization tools can also be included for improved “digestibility” of mission-critical business data.  
• Security alerts – Security alerts are generated in real-time as anomalies are detected. This allows a bank to mount a rapid, decisive response when it matters most. 
• Integrations – Integrations with third-party platforms and other external systems allow you to centralize data for a complete, comprehensive view of the financial institution’s risk management and regulatory compliance landscapes. 
• Project management-type tools – Project management-like tools empower bank staff to develop and enact an action plan. Users can develop a step-by-step plan and collaborate as tasks are completed. This way, each issue is thoroughly addressed and nothing falls through the cracks. 

iTech’s IRM software developers work directly with the client to gain a clear understanding of the bank’s risk management landscape. This insight is used to design a platform that supports the bank’s unique processes, goals, and priorities. Our team takes a modular approach to IRM software development, allowing for a fully customized solution with integrations to mission-critical platforms. We invite you to contact the iTech team today; let’s begin a dialogue on your bank’s regulatory compliance requirements and broader risk management strategy.