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Improve Your Enterprise Risk Management Framework with Process Automation

Leslie Loges, Content Marketing Manager
May 16, 2024

The regulatory and business demands of financial services require teams to collaborate with consistency and accuracy—a difficult task when it comes to enterprise risk management (ERM). Business units often complete their risk management strategic objectives independently, and since each may have its own taxonomies and processes, human errors may go unnoticed, increasing potential risk.

By implementing automation and other advanced technologies like machine learning, financial organizations can develop standard taxonomies, rules inventories for the three lines of defense, and real-time controls and alerts for both non-financial and financial risks. 

Issues with manual ERM processes

When complex tasks like audit, compliance, and risk management processes are done manually, it becomes easier to introduce errors. Errors in data undermine trust and make teams less likely to rely on each other, hampering collaboration across the three lines of defense. The potential impact could mean exceeding the risk appetite of senior management, being out of regulatory compliance, and other costly negative impacts. 

Additionally, as cybersecurity risks grow due to hackers consistently evolving their techniques, it becomes more difficult to stay on top of risk management strategies. This increased risk exposure from cyber threats can be mitigated with automation that decreases delays and errors by streamlining business operations. It also optimizes day-to-day tasks like control activities, risk reporting, and customer due diligence, helping business managers and company leaders make better decisions.

The benefits of integrated risk management across the three lines of defense

Traditional risk management efforts are typically narrow and siloed within their specific departments. By implementing applications that automate essential workflows, the individual business units involved in each of the three lines of defense can reduce the time spent on redundant data verification and error correction and improve trust and collaboration. This allows them to allocate more resources to value-added tasks, such as organizational objectives, strategic planning, and thorough risk analysis.

Leveraging technologies like data fabric, APIs, and robotic process automation (RPA) enables the efficient and scalable automation of data collection from various sources essential for risk assessments, including financial, customer, and operational data.

[Want to improve collaboration between your organization’s three lines of defense? Read commentary from industry experts on how they can cooperate more closely to improve product and service outcomes.]

Five areas to integrate process automation in ERM

There are five key areas where you can improve ERM and risk response within your operations by incorporating automation technology and best practices.  

1. Enterprise risk management

Applying robotic process automation to the entire enterprise risk management program helps companies take a holistic approach and become more efficient and accurate. When integrated with intelligent document processing, RPA enables efficient decision-making by aggregating both structured and unstructured data, which helps companies more consistently meet business goals.

2. Onboarding

Implementing standardized business processes ensures consistent evaluation and verification of key risk indicators across the organization for customers, employees, counter parties, and suppliers.

3. Horizon scanning

Process automation offers flexibility and adaptability to promptly address emerging risks. Monitoring developments, such as upcoming changes to government regulations, allows for comprehensive assessment of their implications across the entire organization.

4. Anti-money laundering

Implementing case management reduces the burden on anti-money laundering (AML) teams and enhances the accuracy and efficiency of AML processes, including reviews, investigations, and regulatory filing management, to address suspicious banking activities effectively.

5. Credit risk reviews

Leveraging data fabric facilitates the consolidation of data from multiple systems into a unified, visual dashboard for reporting on credit risk information. Data fabric also aids in evaluating credit positions, setting early warning alerts, updating risk scores, and implementing corrective measures to mitigate defaults or other adverse events.

Enterprise risk management case studies: How real companies have transformed their ERM processes

The financial services industry is moving toward real-time risk management—a heavy task for many organizations. Companies like NatWest and Operations Clearing Corporation have used automation to address the challenge to improve their risk management processes while improving operational efficiency and furthering their strategic goals. 

NatWest earns recognition for its risk governance processes

NatWest Group (NatWest) operates across various regions, including the UK and Ireland, through its banking brands such as Royal Bank of Scotland and Coutts. NatWest entrusted Appian with several critical business objectives pertaining to their change risk review process: enhancing efficiency, offering straightforward and user-friendly solutions to meet governance requirements, and automating change governance to eliminate redundancy.

NatWest embarked on replacing a labor-intensive, manual change risk process with a new, standardized, and transparent approach facilitated by a low-code workflow developed on Appian. Integration with NatWest's core system, Planview, streamlined the change risk review process, eliminating the need for manual risk assessments by change leads and project managers. Tasks that once consumed weeks of effort can now be accomplished within an hour.

Recently, NatWest was named the Celent Model Risk Manager of the Year for its risk governance automation. The award recognizes NatWest’s ability to reduce multiple assessment cycle times using patterns of governance. For example, the time taken for product governance has fallen from 4.5 days to less than 20 minutes, marking a key milestone in the company’s ‘moonshot’ goal of reducing cycle time from 73 days to, in some cases, 73 minutes.

[Read the NatWest Celent Model Risk Manager of the Year case study.]

Options Clearing Corporation implements nine critical risk management processes in 18 months

The Options Clearing Corporation (OCC) holds the distinction of being the largest equity derivatives clearing house globally. Recognized by the US government as a Systemically Important Financial Market Utility (SIFMU), OCC serves as a mediator between clearing parties, ensuring the fulfillment of contractual obligations.

OCC's role as a SIFMU is pivotal in upholding financial stability for market participants, investors, and the broader economy. Central to this mission is robust risk management, prompting OCC to embark on a digital transformation journey. Prior to adopting Appian, OCC relied on manual processes using spreadsheets and email, necessitating enhanced visibility and efficiency.

Within a span of just 18 months, OCC successfully implemented nine critical risk management applications on the Appian platform. Leveraging Appian's automation capabilities, data management features, and streamlined visibility through records, OCC integrated control and compliance validation seamlessly into its core processes. This transformation enabled OCC to furnish auditors with comprehensive documentation swiftly, facilitating transparency and accountability in decision-making processes.

Bring efficiency, unity, and consistency to your organization

Despite the efficiencies brought by automation technologies, it can be challenging to attain comprehensive, end-to-end automation at the enterprise level. Deficiencies in automation can compromise its effectiveness and may even introduce other kinds of risks.

By using an open automation platform in conjunction with a data fabric, workflows can be orchestrated and seamlessly integrated with both internal and external systems, all while preserving the integrity of your data. Using a data fabric means you can leverage the technology you're already using without the need to overhaul legacy systems or undergo data migration. Moreover, with orchestrated workflows, all three lines of your risk management defense stand to benefit from a shared perspective and a singular source of truth regarding:

  • The progress and status of tasks related to compliance

  • Incident management and responses

  • Understanding where individual contributions fit into the broader organizational context and determining subsequent actions

End-to-end process automation offers simplicity, speed, and enhanced control to the three lines of defense and helps build a more risk-aware culture. In daily operations, risk management teams experience reduced waiting times for approvals and responses to communications, minimizing interruptions and delays.

From a broader perspective, a unified view allows for strategic capabilities like management dashboards with real-time metrics and analysis in critical areas (e.g., pricing, capital utilization, liquidity management, and dynamic forecasting). By orchestrating workflows and leveraging data fabric across systems and functional domains, organizations can enhance efficiency, bolster resilience, and achieve long-term stability.

[Want to take control of your organization’s GRC processes? Learn how Appian’s Case Management Studio can help you improve workflows and accelerate IT delivery.]