In a 2019 Deloitte survey of financial institutions, 85% of respondents said data played a significant role in their risk management efforts. More than half (51%) of respondents said their institution prioritizes data in its risk management strategy, and another 30% are considering doing so.
Identifying risks, assessing their impact, and developing risk management strategies are based on data analysis, a crucial element of risk management.
To effectively use data, we must analyze it effectively. Automated data analysis can help financial institutions identify trends, patterns, and recommend mitigating risk.
In the past, risk management was largely a manual process. Data was gathered from various sources, including financial statements, loan applications, and credit reports, by financial institutions, then examined to identify risks. The process was time-consuming and error-prone.
Risk management tasks can now be automated with the help of cutting-edge technologies, such as artificial intelligence and machine learning. By analyzing data rapidly and accurately, these technologies can identify risks and recommend ways to mitigate them.
Banking and credit unions can more effectively identify and manage risks by automating their risk management processes.
The 5 Steps to Implement an Effective ERM Solution
There are five steps to implementing an effective ERM solution:
Step 1: Establish the business case.
The first step is to establish the business case for why your organization requires an ERM solution. This will help get buy-in from senior management for the project. To do this, you need to articulate the benefits of an ERM solution, such as increased efficiency and improved decision-making. You also need to identify the risks that an ERM solution can help you manage better.
Step 2: Select the right solution.
There are many ERM solutions on the market. It is important to select the one that is the right fit for your organization. To do this, you need to consider your organization’s specific needs, such as the size of your institution and the risks you want to manage. You also need to consider the features offered by each solution and the vendor’s reputation.
Step 3: Implement the solution.
Once you have selected the right solution, you need to implement it. This involves installing the software and configuring it to meet your organization’s specific needs. You also need to train your staff on how to use the solution.
Step 4: Monitor and optimize the solution.
After you have implemented the solution, you need to monitor it to ensure it works as intended. You also need to review the solution periodically to ensure it is still the best fit for your organization.
Step 5: Communicate the results.
After you have implemented and optimized the solution, you need to communicate the results to senior management. This includes sharing the benefits of the solution and how it has helped your organization manage risks better.