“One of the tests of leadership is the ability to recognize a problem before it becomes an emergency.” – Arnold Glasow

Organizations depend on their leaders for guidance, strategy, and direction. Any organization that wants to grow wants its leaders to make the best decisions possible. Managing risks is one of the most critical tasks a department leader has in a financial organization. No project or task can be completed successfully unless all the associated risks have been managed or mitigated adequately. Yet, there is a significant information gap regarding risk data and organizational leaders, with many leaders not having access or visibility of risk levels. The information gap can result in the wrong decisions being taken or the right decisions being taken too late; neither is a good outcome for businesses.

Complimentary White Paper - Top 10 Risk Management Trends for 2022

Risk Information Is Critical

Risk information proves to be critical when making decisions about the organization’s future. FIs with the foresight to focus on upcoming risks can increase their profits while minimizing their losses. Risk affects every department within the organization in different ways. It is vital to have a risk management framework in place that can meet the needs of the risk team and all the stakeholders that interact with enterprise risks throughout the enterprise.

Understanding the organization’s current risks is critical for businesses, but risk managers and other managers often do not have this information at hand. This lack of real-time information stems from how risks are managed in many FIs. Risks are managed through an amalgamation of off-the-shelf software solutions, not through a dedicated platform or system. All the risk-related work has to be performed manually by the risk team. The team must first ask for information via emails, then collect all the information, clean it up for analytics, create a report with meaningful insights, and then present the report to the rest of the organization.

Modern risk platforms do not limit their capabilities to provide real-time data about current risks – they go beyond to generate risk predictions and insights on emerging risks. Click To Tweet

As expected, this process introduces a lot of delays in the risk management process. It makes it practically impossible for managers to have access to real-time data. The managers know about the business’s risks for the past few months or weeks but do not have any way to check the current risk portfolio and the latest assessments in real-time.

Real-time risk data empowers managers by highlighting the most significant vulnerabilities in their departments. Instead of being blindsided by problems once they have turned into emergencies, they find out about issues when they occur and can be easily mitigated and managed. Risk technology’s ability to take in real-time data from multiple sources to generate real-time insights gives managers visibility, allowing them to make better decisions for the future of the business.

Predicting Risks for Insights

Modern risk platforms do not limit their capabilities to provide real-time data about current risks – they go beyond to generate risk predictions and insights on emerging risks. Risk predictions are generated by combining internal data, external data, and historical data to generate trends and much more. This gives managers across the organization insights into emerging problems and risks, enabling them to mitigate them. The analytics also provide information on opportunities; areas where risks are expected to decrease over the coming quarter. Knowing about future opportunities can enable FIs to invest in and focus on things that will provide a good return, providing a significant competitive advantage over businesses that are not generating predictive risk insights.

A more comprehensive view of financial institutions’ liquidity and capital balances, both under stress and under expected conditions, offers more targeted growth alternatives that complement the financial institution’s current risk profile and aids in risk mitigation. For example, risk diversification benefits may result in synergy between a new product and a market, which can be more accurately studied and valued with the right data and analytics.

At the apex of the analytics journey, the insight-driven company sits, experiencing the benefits of improved foresight. To reach this point, financial institutions will need to move away from manual data analysis based on historical performance and toward increasingly predictive and even prescriptive kinds of analysis.

Enterprise Risk Management Software

Interested in seeing how your organization can benefit from a holistic approach towards risk management that delivers real-time risk insights and predictions? Get in touch with our risk experts for a demo of Predict360, our American Bankers Association endorsed risk and compliance solution.