Hail vigilance bot, Cut my operating risk!

"The aim of the wise is NOT to secure pleasure, but to AVOID pain" – Aristotle

While I personally do not agree with the above, when it comes to running a going business, a bank, or any business for that matter, the above saying is close to the truth as one can get to.

The recent scam in a large bank has brought ‘Operating Risk’ back in the spotlight. The over-spoken about ‘credit risk’ has zillions of models and algorithms and approaches. But, very few businesses spend behind cutting or eliminating operating risk.

"Risk audits from large accountancy firms will be things of the past. Not because they are not meaningful, but because, not much action has been taken to suck the risk out systemically. Having a maker and checker is not sufficient anymore. And even if the human intentions are noble, to err is human anyway."

At Praxis, we came up with the ‘Control Tower’ offering for our clients to govern the business in a more risk-free way. We see five clear ‘Governance’ use cases that corporations across the world should think of powering up through Analytics and AI-based tools:

• Monitor key approvals and transactions (Transaction Control Tower): Key decision-makers build the business rules and cascade them down to the people on the ground to implement. This could be approving a loan., sanctioning a credit limit, processing a vendor payment, empaneling a service provider, or even access to critical areas that store trade secrets.
• Automate ongoing trend analysis on key costs (Cost Control Tower): Most organizations run a robust F&A system, often from world-class vendors like SAP, Oracle, etc. However, not many organizations have built the Intelligence layer that tracks transactions, share obvious inconsistencies. E.g. we purchased 10 reams of A4 -size sheets for $50 last month from this vendor, why is the price for 20 reams now more than twice at $110. This often needs a lot of business rules to be coded but once done, it is like a team of infinite cost accountants sitting in the organization checking the maker and also the checker (if such a role is needed).
• Report compliance and Exception Incidences (Compliance Control Tower): AI-based bots can not only report potential compliance issues but also prevent them by signaling potential issues to the source of the issue. This kind of Compliance management engine makes everyone a partner in compliance and maintenance of ‘good business conduct’.
• Track billing, invoicing, receivables, and payables (Cash Flow Control Tower): Talk to any Business Head or Collections Head or Finance Controller and they will admit that they don’t invoice customers on time. Once invoiced, the reminders do not go out on time despite the F&A workflow tools having these features. The trick is not in following this hygiene but knowing then the hygiene is not being followed or is inadvertently getting ignored.
• Arrest any root causes of attrition of top performers (People Control Tower): Very few organizations budget for their biggest risk, i.e. losing their best and most motivated people. Sad but true! The good news is that it is possible to contain this risk dramatically by not ignoring the lead indicators of people ‘making up their minds on whether to put in their papers or not’.

Let technology and AI be the watchdog on self, almost like the wearable wrist band that monitors the sleep quality even when you are asleep.

Authored by (at the time of writing):

Madhur Singhal, Leader, Financial Services Practice

Aryaman Tandon, Leader, Financial Services Practice 

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