Cloud For Finance

How Automation and Analytics Are Revolutionizing Risk Management



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Finance leaders are increasingly turning to automation and analytics to improve process efficiency and identify opportunities. But these evolving technologies are also revolutionizing another key area of finance: Risk management.

“We’re still in the early stages, but (risk management) is an area of growing importance,” says Rich Clayton, Oracle’s Vice President of Analytics. Given the drumbeat of regulations, the global nature of business and investors’ growing emphasis on transparency, the possibilities for improving risk management abound.

In the same way technology has helped accounting teams automate back-office tasks and streamline reporting, automation, AI and machine learning are transforming how finance leaders manage risk, remain compliant and stay accountable to shareholders.

Automating risk management

At its most basic, the advent of robotic processing automation is streamlining tasks once handled by people – but in the realm of risk, it’s also doing much more. Consider, for example, the potential for improving SEC filings and offering better context around the data, Clayton points out. “Producing a public filing is a very manual process,” he says.

But that is changing. Technology is making it possible for organizations to not only automate the filings, but also provide more timely and accurate narrative reporting. “For large companies, there could be a couple hundred people offering context around these filings,” Clayton notes.

Another area of tech focus is internal audits, which has traditionally been labor intensive and subject to human error. “In the past, it has required sifting through enormous amounts of data,” Clayton says. In a 2015 survey by the World Economic Forum, 75% of technology experts noted that 30% of corporate audits will be performed by artificial intelligence by 2025.

Financial services takes the lead

While automation software is opening up new risk management opportunities for finance leaders in every industry, financial services companies have understandably taken the lead. A report by McKinsey notes that currently about 50 percent of financial services staff are dedicated to risk-related work and 15 percent are focused on analytics. By 2025, those figures will be reversing, becoming closer to 25 and 40 percent, respectively.

For example, banks are increasingly relying on “faster, cheaper computing power (that) enables risk functions to use reams of structured and unstructured customer information to help them make better credit risk decisions, monitor portfolios for early evidence of problems, detect financial crime, and predict operational losses,” the McKinsey study reports.

Internally, some financial firms are taking advantage of automation to detect and decrease issues of employee conflict. For instance, technology can help review employee disclosure forms and match them with personal account activity to catch discrepancies and alert management to issues.

Readying for the future

Regardless of the industry, the potential for technology to improve risk management processes is exciting. But finance leaders will need to prepare for this transformation, and experts believe there’s much work to be done.

The first steps include automating core financial processes, deepening the analytics skills of your finance team and making strategic technology investments. In addition, finance leaders should focus on creating a culture that prioritizes risk management, with finance helming technology initiatives that make adopting a new operating model for risk easier across the board.

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