Regulatory change management is a critical process for any business operating in an industry that faces regular changes in federal and state level regulations. Most businesses do not have to worry about regulations too much, but those that operate in industries where the government periodically changes the rules need to make sure that they have the capability to adapt with the changes occurring in the regulatory framework.  

Managing regulatory change requires knowledge and experience in understanding regulations, mitigating risks, and ensuring compliance. New regulations mean new risks to manage and new rules to comply with. Most regulatory change management work was done manually, with the regulatory experts in the organization guiding the rest of the enterprise in adapting to the changes. Modern Regtech solutions have significantly simplified the process at every step of the way.  

Getting Regulatory Updates 

Being aware of upcoming regulatory updates is the first step towards managing regulatory changes. The appropriate people within the organization need to be aware of the latest regulatory developments so they can proactively plan for the changes that need to be implemented. This is not too difficult a task when done manually, but there is a chance for human error. If someone working in the regulatory change meeting misses an important update it can cause problems for the business. 

Regulatory change management software simplifies this by providing a feed of regulatory intelligence directly within the Regtech platform. This means that the change management team is no longer responsible for finding regulatory intelligence. The regulatory intelligence comes to them instead, making their jobs easier and ensuring that no important update is missed due to human error. 

Understanding Changes 

Whenever there are any regulatory changes the first thing that the change management needs to do is understand what has changed and how much it has changed. Regulations need to be deeply studied because there are often slight changes within the different sections of the regulations. This takes some time when handled manually but is an instantaneous process when Regtech has been used. The quantity of regulations that are updated do not matter – computers can compare thousands of pages within a matter of minutes and highlight all the changes that have been made. 

Some Regtech solutions go a step further and attempt to parse the regulations as well. This is done to extract important insights from regulatory updates. For example, if a creditor wants to know the regulatory updates that will affect them, Regtech solutions can highlight all regulatory updates which refer to creditors.  

Assessing Required Changes 

The most dramatic upgrade in performance comes in the process of change assessments. Once the regulatory updates are understood, the next step for the change management team is to look at how the effects will affect the business. This is an extremely complicated and laborious task. The change management team must first understand which of the policies and documents are affected by the changes, and then determine the extent to which things have changed. Then they must create a change management plan that successfully tackles each and every effect of the regulatory updates on the organization.  

This process is completely transformed with Regtech. Regtech solutions have a risk map feature which allows businesses to define the relations between risks, regulations, and internal reports and documents. This means that whenever there are regulatory updates, the system simply looks at which regulations were updated, and highlights all the risks, compliance rules, policies, reports, and documents affected by the changes. Instead of having to investigate the changes, all the required information is provided directly to the change management team. 

Implementing the Changes 

Implementing the required changes is a complicated task as well because it requires a lot of collaboration across the enterprise. The change management team must first explain the changes that are required then coordinate with the other departments to implement the required changes in policies and processes. Keeping track of so many regulatory activities across the organization is a challenging task and presents a lot of problems for the board as well as the change management team.  

Regtech solutions simplify the process and make it easy to manage by including an activity management system within the Regtech platform. This means that all activities across the organization are being tracked in one place where the board can manage them. Instead of a sprawling mess of activities, upper management gets live updates on all activities through executive dashboards.  

These are just some of the ways Regtech is transforming regulatory change management. As artificial intelligence technology evolves further, we can expect there to be even more automation in the regulatory change management domain.  

Improving risk management for third parties has been a constant concern of compliance officers in their work as responsible for an anti-corruption program. At the beginning of each year, the results of the management are evaluated and some organizations make great efforts to improve the risk management of third parties, it cannot be hidden that third parties are increasingly posing greater threats. 

For this reason, we believe that it is a good idea to share here a series of suggestions to improve risk management for third parties, which will undoubtedly be one of the primary objectives of an anti-corruption program. 

How to improve risk management for third parties? 

One of the reasons for concern about third-party risk management is the cycle of the process, which in many organizations is carried out in reverse.  These establish a commercial relationship with a contractor or a supplier, which acquires access to critical systems such as billing or communications, and then carries out the risk assessment. 

Of course, this is the wrong approach.  The risk assessment for third parties must be prior to the establishment of a commercial relationship, or of any other type. In fact, this management must be continuous and carried out with the periodicity that the conditions of each third-party demand. 

This is part of the purpose of improving third party risk management. But we can take other measures: 

Have the right people 

Risk management for third parties requires the participation of the people who have interference in the issues over which the third party has scope. For an information and technology service provider, it is natural for the CISO to be involved rather than the CEO. 

In some cases, a professional from the compliance area is the most indicated, but in others, the participation of the directors of the commercial area may be preferred. 

Prepare a list of third-party risks 

Typically, third-party risks are identified when they appear. Of course, it is already too late. But if making a list of the organization's risks, it is a complex task and much more complex to try to identify the risks that each third party implies. It is almost like multiplying the task done in the organization by the number of third parties. 

However, there is a methodology that we can recommend: the idea is that those in charge of each area, prepare lists of risks of third parties that are related to their department. 

Next, a committee is formed in which these directors of each area participate, with the mission of reducing the list to only ten main risks. The process, of course, goes through an intense debate that can take many hours. But the result, if done with dedication, is reliable. 

Define a risk assessment process 

Compliance officers apply due diligence to third parties to prevent corruption risks. This includes certifications, training, research etc. The process to improve risk management for third parties is not very different. 

Forming an internal third-party risk committee is of great importance at this point. This committee must have the input of executives and area directors, especially in the drafting of policies and procedures to follow for the engagement of third parties. 

Implement an effective reporting system 

Reports are more than just documents containing data and conclusions. It is necessary to think about indicators, key risks, procedures etc. But, above all, it is necessary that the reports define to what extent the risk posed by a certain third party can be tolerated. A reporting system is required that shows third parties with a high risk of corruption, but also those third parties that represent a lower or no risk. 

Improving risk management for third parties means preventing rather than remedying. Information, of course, is a decisive tool in the success of the task. Automated anti-corruption programs exhibit much higher levels of performance than those that still run-on spreadsheets and email accounts. 

Automated solutions also make it easier for third parties to comply with your requirements. Instead of continuously asking people working in the organization about what they need to do to comply with, they can simply access the third-party risk management system and look at all the requirements.  

Businesses also get a lot more data if they have a third-party risk management solution in place. They can track the historical performance of all their third-party vendors to determine which vendors are the most problematic and need to be replaced with more trusted vendors. It is also easier to follow up on issues which are previously occurred, because the record of those issues exists within the third-party risk management solution being used by the organization.  

There is no doubt that traditional banking, both in Latin America and in the rest of the world, has played an important role in credit risk management. However, implementation and performance models have lagged behind the application of new, more effective technologies. While fintech and online companies process loans without collateral, requesting few documents and in five minutes, banks are still adapting to this reality. For these financial institutions should move quickly to use with big data, Artificial Intelligence (AI), augmented reality, deep or automatic learning and APIs of machine learning, and so their risks are controllable. 

Challenges of risk management 

Within the traditional credit risk management schemes, banks have a wide variety of tools to analyze personal and business data. To guarantee these operations, they use a credit rating or evaluation corresponding to each person, entity, company or country. 

This assessment, which is carried out through different evaluation processes, warns the bank about the ability to pay or non-payment and is currently a process that takes a certain time depending on the loan, which has fostered a new culture of micro-credits approved in minutes and almost no requirements. 

That is why innovative forms of real-time credit risk management represent an important initiative for users. Although it is a small aspect within the wide range of financial products, it highlights the lack of transition of the majority of Latino banks. The younger connected generations are becoming more demanding and expect greater versatility in terms of these products and services. A more immediate availability of approval for different credit options highlights the importance of ICTs in risk management. 

Risk management is not only restricted to the domain of banking only, but it is requirement for other industries as well such as money service business. Better money service business risk assessments are vital for MSBs as well as their clients.   

Big data solutions and other technologies 

Perhaps faster than anticipated, digitization is transforming business models dramatically. Due to a substantial increase in the generation, interpretation, protection and filtration of data, more efficient, powerful platforms or APIs with greater analysis capabilities are required. 

The data big represents a tool for variable broad spectrum solve certain associated with managing credit risk. Through its various applications, Latin American and global banking has more accurate forecasting models that include a real-time evaluation capacity. To this speed of response are added applications of voice recognition, augmented reality, AI, fog and edge computing, among others. Everything is intended to meet the demands of information processing, facilitate processes, generate more immediacy and have control mechanisms with better overall performance. 

Fintech companies are well aware of the scope of this automation, as it provides a broader view of the possible risks involved. In this way, they can guarantee credits, loans and other services almost instantly because they have predictive tools to know in more depth the variables of default or not. 

The bank has the resources to take advantage of the speed, volume, diversity, value and accuracy of the data with this technology. This not only allows you to save costs in terms of digitization, but also to offer better financial products with availability that does not require such a long wait. The software integrated with the qualities of big data has a more developed capacity to predict credit behaviors. 

The records are managed in a few minutes, which allows banks and financial companies to anticipate with greater objectivity the real possibilities of return, fraud or money laundering. 

Risk management trends 

If traditional banking wants to be part of Industry 4.0, organizations have to be in tune with emerging technologies. In many cases, the rise of automation will give way to cognitive initiatives based on artificial intelligence that will replace risk decisions to some degree. On the other hand, behavioral science continues to develop models to define the perception of risks. 

These advances are promoting a better understanding of the various assessments related to this type of management, improving decision-making regarding various credit aspects. Assuming that the economy moves towards a network structure, the collective management of data will have greater preponderance. 

Under this context, risks become more tangible, measurable and quantifiable as performance values. This gives banks a better ability to determine the appropriate levels of certain policies. Finally, the disruption of emerging technologies dictates the transformation of traditional business models. 

Hyper-connectivity amplifies the voice of the user and spreads their perception of the values, services and reputation of financial companies in various digital channels. If the field of credit risk management and companies’ dependent on this area want to survive, they must implement strategic measures that take into account these inevitable factors of change. 

The tools that the businesses need to implement shouldn’t be looked at as an expense – they are an investment because they will provide a lot of benefits to both the organizations and their customers. Businesses will be able to curb fraud and scams easily while customers will get much faster and more convenient financial services. Risk management is too important to be left dependent on the vigilance of a few people – it needs all the technology and power that it can get. 

The idea that computers can successfully perform routine tasks is not a recent one and underlies almost all recent technological efforts. Today, however, the solution is no longer exclusive to the technology labs of large companies to become part of the reality of small and medium businesses.  

By qualifying your results, much can be solved with business automation. Want to know more about it? Keep reading and better understand how it works and what advantages it brings to your management! 

What is Risk Automation? 

Basically, automating processes means optimizing fundamental parts of your business through technology, with applications and software capable of reducing errors and improving your productivity. 

Thus, automation is able to reduce the time and labor required to perform routine tasks - and to do this, it replaces manual processes with precise and monitorable codes. Therefore, automation should not be viewed with fear by its employees. 

Most of the time, their role - mainly regarding the handling of operational processes - is to reduce the employee's effort. And, far from extinguishing the need for work or human supervision, it emerges as a strategy to make your resources yield more. Therefore, reducing costs and increasing productivity are not the only benefits obtained by your company after the automation process. As we will see below, other aspects make this investment a priority to speed up management. 

Main Advantages of Adopting Process Automation 

Identifying the weakness in your operations 

When implementing technology, your company needs to spot the right opportunities to automate itself. And, throughout this work, management has a chance to identify inefficient workflows, and misunderstandings and waste that make your company less profitable. 

In this sense, correcting these and other bottlenecks in your production is essential for automation to lead to improvements. 

Optimized methodologies and workflows 

For automation to work you will need to define methodical and efficient workflows, focusing on your business. In this regard, the methodology is the chance to reduce failures that prevent your company from producing at full capacity. 

Higher productivity in risk processes 

The main reason for opting for technology is to be able to increase the productivity of your company without having to invest in expanding the number of employees. With process automation, you get more tasks done in less time, and completing repetitive tasks with speed will leave free time for decisions that really make a difference. 

In addition, with this type of automated software, the breaks that your employees need to take between one repetitive activity and another - to maintain the level of deliveries - are not necessary, which also contributes to time management. 

Large-scale quality 

Do you have difficulty maintaining quality standards with manual labor, no matter how well your team has well-established workflows and efficient methodologies? In fact, when dealing with human resources, you cannot predict what will influence your results. 

Through automation, however, obtaining standardized, high-quality results is a certainty - 100% of the time. 

Risk monitoring and analysis 

Are productivity reports a problem to calculate performance indicators and more accurately manage the risks of each project? Then get consolidated data on the performance of automated systems and better evaluate what step to take in the future. Thus, completed or in progress, your processes are always traceable, and it is even easier to exercise control over your deadlines. 

Automation also enables risk analytics that take risk management to the next level. Instead of manually managing everything in spreadsheets, all the data is now available in a central platform. This means that the platform can perform in-depth analytics on not just the risk metrics but also about all the risk appetite related data. The risk management platform can track productivity as well, by measuring the time it takes for an issue to be resolved once it has been detected. 

Risk management solutions can also automate risk predictions. This is accomplished by combining internal metrics collected by the risk management solution with external metrics to create patterns and trends. These patterns and trends can help businesses detect emerging risks and opportunities in the risk domain. 

Cloud solutions: Efficiency for small and medium businesses 

When it comes to process automation, online systems are a good alternative, as they allow greater flexibility for companies and users. Here, your savings result from the availability of a service between multiple platforms, without your company having to invest in new equipment for this. 

In addition, cloud solutions are able to run wherever you are, with real-time updates and complete integration between your teams. In that regard, small and medium-sized companies have the upper hand and can get the best of technology for a slice of the price. Cloud solutions are also easy to use in a limited capacity before the whole solution is purchased – this allows businesses to test the system without spending a significant amount of money.  

Every bank must contend with risks. When we use the work risk in our daily lives it is usually a bad thing. We may tell someone to not do something because there is a risk attached. Businesses, however, think of the work risk differently. Risk isn’t something to be avoided, it is something that is inevitable and the only thing that businesses can do is manage and mitigate risks. This may seem like a strange approach to risks but when you think about it from the context of inherent risk it all makes sense. 

Inherent Risk 

In enterprise risk management there is a concept called inherent risk. Inherent risk is the risk which is present in any action or process inherently, as the name suggests. This is a far more accurate description of risks than the one we use in personal conversations because when you think about it, there is nothing we can do which does not have a certain element of risk. Whenever we leave homes there is a slight risk attached – staying home also has a slight risk attached. If we see on the news that there is a chance of rain we take our umbrellas with us when going out – that is basically what enterprise risk management does. It looks at the current risk indicators to understand the steps that businesses need to take to minimize the damage caused by risks.

Risk Predictions  

The weather analogy works for how businesses predicts risks too. The weather experts can tell us about how the weather will be in the near future based on many different sources of data. They look at the data coming in from sensors telling them about the current weather. They look at historical patterns of weather of the area to assess how the weather performs in different seasons. They also look at the weather of adjoining areas to detect trends. They track major storms that may come near the area and affect the weather in the coming few days. Similarly, risk managers in businesses look at multiple sources of data to determine how a risk will evolve and affect the business in the coming few weeks or months. 

The first thing that risk managers look at is the current data metrics. They look at both internal and external data. The internal data is derived from internal processes and reports. The external data is related to markets and government publications. This data is used to determine the current level of risk that the bank is exposed to and must manage. Once the baseline of current risk has been created the risk managers then move on to looking at how the risks will evolve. 

Historical patterns of risks are also very important when it comes to risk management. Every area is different because of different factors in the economy and consumer behavior. Thus, risk managers look at the current situation and look for a similar situation in the past to create trends and expected patterns which can help predict risks. Once a risk model has been created based on historical data, risk managers look at how the metrics will change in the coming few months. 

Like weather experts look at storms, risk managers look at major events. The Covid-19 pandemic was unprecedented because it is a global event – most such things are not global and move area to area. Businesses look at new economic patterns, disruptions, and anything out of the ordinary happening in the areas that are similar in profile to the area where the business operates. This helps them determine the effects of the event on the business itself. 

Why Predictions are So Important  

Risk Predictions are essential in risk management because they allow a business to succeed even in the face of adversity. Businesses can survive risks if they are aware of the effects the risk will have on the business. They can create plans and make investments which will keep the business safe from the fallout of the emerging risk. If a risk is not predicted the business will have to quickly move to minimize the damage caused by the risk but usually this reactive approach is not enough.  

Think of risks as an iceberg and a business as the ship. If the person who is looking for icebergs detects the iceberg in time the ship can change course and avoid the iceberg immediately. The damage to the ship will be non-existent. The only difference will be that the business will go off-course temporarily but that can be corrected quickly without any major losses. However, if the iceberg is not detected in time then it will hit the ship and cause damage. The ship’s crew can then work urgently to minimize the damage and protect the ship but there will still be a lot of damage incurred. 

Risk predictions help businesses in the same way. They give the executive board the opportunity to change the course of the business so it never hits the iceberg. There are now many risk prediction tools available online that can automatically parse data from multiple sources and provide warnings for upcoming risks. Such tools will be a necessity in the future for businesses because the businesses that do use such tools are performing better than the businesses that do not. Thus, it is important for businesses to use risk prediction tools if they want to stay competitive.  

Risk and compliance experts occupy a niche industry. They have specialized knowledge and experience, and this knowledge is highly valued in the financial services industry. However, there is a major change coming in risk and compliance. Both have largely been handled manually be experts in smaller organizations. Your risk and compliance experts would be the framework that would help the organization ensure compliance while lowering risks. Automation, however, has changed the equation by taking over much of the work that risk and compliance experts did. 

This leaves us in the current situation – where many risk and compliance experts are questioning their role in the organization as more and more risk and compliance processes become completely automated. The changes that affect this niche sector is of interest to people working in any industry or sector as automation will end up reaching every industry and every type of job. The risk and compliance domains thus provide a great chance to see how automation changes job roles. 

Risk and Compliance Experts Are Not Going Anywhere  

The biggest anxiety that most people have is that they will lose their jobs to automation. Now, there is some truth to this statement, as many people have lost their jobs to automation and many more will lose their jobs to automation in the coming decade. However, things work different when it comes to domains like risk and compliance. What is important to understand is that risk and compliance work can be divided into two types of work – administrative work and strategic work. 

The administrative work is currently what risk and compliance experts spend most of their time doing. This includes activities like keeping track of risk metrics and compliance issues, ensuring that all activities are being completed on time, creating reports, getting everyone else to fulfill questionnaires, and so on. A lot of these activities will be completely automated in the coming few years. Now, this raises the question – if most of the activities that risk and compliance experts are responsible for are automated, then why will an organization need risk and compliance experts? 

The answer to that question is simple – there are many other things that risk and compliance experts can do for their organizations.

Technology Will Increase the Importance of Risk and Compliance Experts  

As we said before, risk and compliance work can be divided into administrative and strategic work. Most administrative tasks will be completely automated, but the strategic work is a whole different ballgame. See, risk and compliance also require a strategy based on corporate goals. That work will be done by humans for a long time because it is based on human preferences. Risk and compliance experts are currently mid-level employees because they mostly engage in administrative work. When the administrative work is completely automated it will give risk and compliance experts free time to work on bigger projects. 

Instead of simply creating documents and spreadsheets, risk and compliance experts will be able to look at the overall corporate strategy and look for improvements. They will be able to recommend strategies that can help businesses cut costs and become more agile. All this will be easier to accomplish because so much of the administrative work will be completely automated. This means that risk and compliance experts will be free from menial work and will instead be able to apply the full scope of their expertise and experience to help organizations perform better. 

This is also why businesses that have automated risk and compliance tend to rely so much on the advice of risk and compliance experts. Risk and compliance automation technologies deliver thousands of new metrics and data points that can help banks gain insights about their risk and compliance shortcomings. There is a lot of intelligence embedded in the data that is being generated within the organization. Once the risk and compliance experts start analyzing the data and delivering new insights, the organization gains a better understanding of what it needs to do. 

Risk and compliance experts of the future will be more satisfied with their jobs because they will have to partake in fewer menial tasks and will instead be able to focus on helping the business achieve their corporate goals. This is important because it changes risk and compliance domains from being cost drivers to being value generators. Businesses will realize that their risk and compliance teams are not an expense – they are an investment that can help the business do more with fewer resources. 

The administration of business continuity and information security in times of digital transformation is mandatory for risk management and compliance. These two concerns are crucial for companies to remain modern, stable and healthy in the market, with an internal alignment adjusted to the best protection practices. 

These concepts are similar and, therefore, can be confused. In this sense, the ideal is to learn what each one implies and understand how they work together. In addition, to ensure this stability and protection for all layers, the company needs to know how to get outside help and the importance of it. 

If you want to know the subject in depth, follow all the topics that we will develop below. 

What is risk management and compliance? 

Let's start by clarifying the definitions. Risk management is a reorganization of the company to deal with uncertainties and threats to the development of internal projects and processes. That is, it is a way of allocating resources efficiently, considering the main dangers that can interrupt activities and generate losses. 

Management begins with the identification of these unforeseen events, which makes the company understand what are the specific dangers for each context. They can be environmental, physical, financial, digital and even caused by people working in the environment. 

Then, management proceeds to the assessment phase of these threats, with the determination of the level of impact of each one. In this way, it is possible to separate risks and classify them according to the degree of consequence they generate. After all, they are not all the same and should not be treated like this. 

Based on this, the internal team is able to define contingency actions for each of the hazards, with the definition of priority for major problems. That way, everyone will be prepared for an eventuality. 

Thus, this administration is a way of balancing the goals with the dangers that oppose them. With this preventive management, teams are able to maintain productivity by mitigating these external or internal factors and execute response plans when they arise. 

Compliance 

Compliance, in turn, is adaptation to pre-established laws and standards. The company adjusts to comply with prescriptions and manages all systems and methods to ensure this compliance. The objective is to prevent fines, indemnities and problems with the inspection agencies. 

It is important to note that compliance also includes compliance with internal rules. Thus, it is a way of standardizing processes, seeking alignment with the standards. With compliance, companies are able to combat fraud, corruption, policy inconsistencies and security vulnerabilities. 

The great advantage is to establish clarity and transparency for stakeholders. In this way, the organization becomes more valuable and efficient for its customers, obtains better agreements and partnerships with interested people, as well as better credibility in the market. 

Compliance is structured in three main stages: prevention, detection and correction. The first phase deals with preventive actions, which seek to prepare for the risks of non-compliance. 

It also defines the creation of plans and policies to facilitate the process. Detection focuses on identifying gaps and problems that still exist, while correction is the application of punishments and adjustments to combat the lack of alignment. 

What are the challenges of compliance management? 

When we talk about compliance, it is interesting to explore the main challenges of this practice in companies. One is the lack of visibility. Many managers fail to have a broad view and control over the use of systems, the practices of employees, as well as the security of information as a whole. 

This also includes shadow IT and a lack of control over assets. This lack of clarity undermines control and affects the organization's alignment. 

Another issue is the lack of data and systems integration. Some companies still work with systems in silos, with sectors that work in isolation and communicate little with each other. Thus, it is difficult to achieve agility with joint work, as well as a vision that facilitates compliance. 

It is more complicated to achieve alignment when each sector works with its rules. This isolation creates a communication bottleneck, which becomes an obstacle to compliance. 

The lack of cultural support is another factor that deserves mention. In other words, for a company to apply a compliance policy and achieve good results, it is necessary to reorganize the culture and the way operations are carried out, as well as everyone's mentality. 

Taking information security laws as an example, we realize this. If members and teams do not work with a culture focused on data protection and privacy control, it will be even more difficult to comply with the rules that address the issue. It will be a challenge for management to ensure this necessary alignment for compliance to happen. 

Likewise, the lack of training of members on the laws also undermines compliance. If the teams do not master the principles of the prescriptions and do not know how to apply them, the adaptation effort will face greater difficulties. It is necessary to deal with this challenge using communication and clear adaptation plans. 

What are the differences between risk management and compliance? 

To advance the understanding of the relationship between risk control and compliance, we will examine the differences between the concepts. One is that risk management is strictly preventive. 

In other words, it is a set of actions that seeks to deal with threats before they happen, in order to prepare the company for contingency situations. It is different from a corrective approach, which is only concerned with dangers when they arise. 

This proactivity is also different from compliance, which is a more prescriptive strategy. Thus, the focus is to obey the rules and laws already established. While risk management works directly with the prevention of threats as an end, compliance deals with this prevention as a means to achieve adaptation to the standards. 

In addition, in working with the management of possible dangers, there is a clear effort to define and detail threats, with their implications and characteristics. On the other hand, in compliance management, the view on problems is more general, with a balanced attention with a focus on the prescriptions established by higher bodies. 

Maintaining a reliable business is a complex process. In the digital transformation scenario, in fact, thinking about security and risk management together is critical. After all, there is no way to guarantee the reliability of internal routines without IT solutions guaranteeing the company's privacy. 

Going together, security and risk management policies can reduce failures, improve internal processes, and ensure that solutions such as ERP are present in more locations. In other words, the company may invest in technology with a greater focus on results. Thus, from data analysis solutions to management tools, everything will be fully utilized. 

Do you want to know more about how the integration between security policy and risk management can be a good idea? So, check out the following post! 

The importance of risk management 

Risk management is a process aimed at identifying, treating, and eliminating factors that contribute negatively to the company's workflow. It can be applied to areas such as technology management, logistics management and even industrial maintenance. Well done, it reduces the chances of the company facing serious problems and losing its competitiveness. 

Why risk management is part of business security processes 

Operational risk management is a comprehensive policy, dealing with factors ranging from the absence of professionals to equipment malfunctions. However, as technology is integrated into the company's daily routine, IT risk management has increasingly been linked to corporate security practices. After all, problems in this area can hinder the company's operation and cause financial losses. 

An information leak, for example, can expose projects and customer data. Therefore, it is important that the two areas are thought of side by side. Thus, it will be easier for everyone to structure robust actions capable of generating the expected impact. 

How risk management improves the use of IT 

The creation of an integrated security and risk management policy can have major impacts on the business. See below how they relate to the use of technology in the daily life of the company! 

Reduces unnecessary IT spending 

Risk management prevents the business from spending more than necessary on technology. This is especially true for investment in solutions such as cloud security or those of cyber hygiene. As there will be more knowledge about what can affect the company, each decision will be more intelligent and effective. 

Identifies the impact of actions 

Risk management works continuously to provide more reliability for the day to day business. In this sense, measuring the impact of actions is one of the first steps to ensure effectiveness in the decisions taken. This will be possible from a comprehensive analysis of the company's chain, which minimizes the chances of a bad choice being made. 

Checks for conflicts 

The structuring of a good security policy and risk management facilitates the assessment of the existence of conflicts between existing processes to reduce internal problems. Therefore, this is an alternative that should always be considered. After all, if done well, it guarantees that the company will be able to maintain functional processes and with a uniform standard of execution. 

Classifies risks 

Knowing the potential of each risk that can affect your company is fundamental to the success of your daily routines. After all, this makes the targeting of actions and investments more intelligent. Therefore, always seek in this practice a way to improve the approaches implemented by the company. 

Avoid vulnerabilities 

The reduction of the vulnerabilities that a company has is another benefit that a good security and risk management policy brings. If gaps are monitored and mitigated continuously, the chances of them causing damage are much less. After all, every company will be aware of the impact they can cause. 

4 security and risk management trends 

To optimize your risk management policy, it is important to be aware of what is changing the market. This will facilitate new investments. In addition, it will improve the direction of business actions. 

Among the main trends, we can point out: 

• the use of resource monitoring solutions. 
• the integration of new technologies with the reformulation of security processes. 
• the application of technologies such as Big Data and BI (Business Intelligence) to make decisions. 
• the use of performance indicators to identify the result of the measures. 

How to start these processes in your company 

To create a good security and risk management policy, it is important to evaluate the day-to-day business and shape the processes according to market trends. The manager should also identify the IT risks and other areas that compromise operations. In this sense, some measures that can be taken involve: 

• evaluate the profile of the device and software infrastructure. 
• classify operational risks by their potential impact. 
• create preventive and risk mitigation measures based on existing data. 
• train professionals to adopt good practices in their daily lives. 

The digital transformation has taken technology to several areas of companies. The Internet of Things and Big Data, for example, contribute to reducing errors and generate innovation. Management systems facilitate the work of the leader and the search for a more integrated and functional environment. 

But such benefits can only be reaped if IT is properly integrated into the company's day to day. Using the support of a smart IT security and risk management policy, this can be achieved. The tools will be more reliable and, thus, their use can be made without compromising the company's competitiveness. 

Have you ever stopped to analyse whether financial risk management is done correctly and efficiently in your company? Do all efforts to avoid bankruptcy in the business? You are likely to be divided when answering this question, as it is sometimes overlooked by managers. 

Why prepare to avoid bankruptcy? 

Dealing with market fluctuations and unpredictability is a task for both large and small companies and is a fundamental part of the growth process. 

As the market undergoes constant changes, it is necessary to be prepared to minimize the impacts on the financial sector and to act correctly when an unexpected event arises, avoiding bankruptcy. To do this, financial risk management is essential. 

After all, as previously mentioned, it is through this management that it is possible to deal with fluctuations and unpredictability of the market, in addition to being able to foresee changes, reduce negative impacts and also know how to act appropriately from each event. 

If you want to understand more about financial risk management and how to implement it in your business, keep reading this post until the end. 

What is financial risk management? 

To understand more about financial risk management , it is necessary to know that any institution that seeks to increase its profits through the sale of products and services, is certainly taking risks - product delivery risks, operational risks, market risks, quality risks , among others. 

Therefore, the main objective of financial risk management is to reduce the effects caused by the market in the company. Therefore, it is considered a managerial measure that allows the company to be prepared in advance for any changes that occur in the scope of business. 

However, this attitude goes beyond what is thought, because anticipating possible risks, controlling expenses, and improving the company's financial management can prevent even the business from breaking down. 

Main financial risks for a company that can result in bankruptcy 

But what are the main financial risks that surround a company and should be avoided so that there is no bankruptcy? Basically, they are defined in four types: 

Operational risks 

Operational risks relate to the possibilities that the company must be affected by losses that occur due to the failure of employees, processes, or internal systems. As an example, we can mention defects in obsolete equipment, software, or hardware or even little or poorly qualified professionals. 

Market risks 

The market risk relates to changes that refer to prices and rates that can affect in any way the financial situation of the company. As an example, we can mention a company that imports inputs and pays in dollars but commercializes the product in the national market. Therefore, this entrepreneur is subject to a drop in the price of the real, which will directly impact the moment of fulfilling the commitments agreed with suppliers. Therefore, being subject to currency fluctuations is a type of market risk. 

Credit risk 

Credit risks involve the possibility that payment to the creditor will be made late or that payment will not be made. As an example of credit risk, we can mention the financial companies that lend money to customers. 

When an individual or an entrepreneur applies for a loan, it is scrutinized according to its ability to afford that loan contract. If the finance company in question realizes that that customer is at high risk, he must pay more interest. 

However, it is worth remembering that credit risk also impacts other segments such as commerce, industry, as well as other businesses. A distributor, for example, that receives payments through slips is exposed to the risk that its buyer will not pay for the goods after receiving them. 

Liquidity risks 

The last risk, however, is liquidity risk, and it is associated with the company's ability to pay its bills or not. When it is failing to meet its financial commitments, it is likely that behind this there is poor cash flow management due to a mismatch. As an example, we can cite bills that need to be paid, but there is no forecast of cash inflow, which consequently can leave the company in debt and the payment of these debts with fines and interest. 

Both risk management and Compliance help prevent threats to the company's legal structure and physical assets. Therefore, we have prepared this special content for you to check everything about the two methodologies and the advantages that the proper implementation confers on the business. Check out! 

What is risk management?  

First, it is important to conceptualize what risks are: internal and external effects that cause uncertainty and unpredictability in any business management process. When these uncertainties are combined with inadequate management, the possibility of losses, in many cases irreparable, grows. The best way to deal with the issue is to perform a management capable of directly measuring and combating risks, avoiding, mainly, that they reach the company's profits. 

Risk self assessment, therefore, constitutes a series of specific processes and activities with the objective of correcting deficiencies and avoiding failures that compromise the organization - in addition to generating value for the company. This management also involves identifying opportunities that enrich the market value and the infrastructure of the business. Managing risks also means establishing strategies that provide a balance between the goals to be met and the different dangers that surround them. Risk management professionals are responsible for identifying uncertainties in the processes, measuring the probability of damage and its possible impacts. 

They also operate by establishing how failures will be treated and ways to reduce their effects. This team assesses any non-conformities, external or internal, that could threaten the goals and objectives set by the company. Regardless of the segment and size of the company, it is risk management that will help define the future and the capacity for business growth. Among the multiple benefits that risk management provides for the company is the prevention of losses and financial assets. 

This is done through product testing and analysis even before it is launched on the market. Thus, the company maps all the variables of the processes involving that asset. The modernization brought by the risk management methodology helps companies to consider all factors related to the launch of new solutions on the market. 

Another significant benefit is the general optimization of processes and the appropriate use of operational resources. When verifying and managing the risks involved, it becomes much easier to allocate resources and inputs with agility and define more effective processes, optimizing the company's performance. In this way, it is possible to increase the team's productivity and generate more efficiency in the business routine. 

The company's profit margin is also directly benefited by a competent implementation of risk management. After all, resolving all the issues that displeased consumers after the launch costs a lot more for the company.  

What is Compliance? 

The name comes from the English verb "to comply", which designates the action in accordance with the rules. Compliance is often translated as compliance by several communication vehicles, highlighting its meaning - a methodology for complying with current legislation. 

Compliance relates to a series of control mechanisms with the function of ensuring that the institution's processes are being carried out in accordance with legal requirements and without neglecting the ethical values ​​imbued in the company's mission and values. It involves a good relationship with investors, customers, and suppliers, that is, the entire chain of relations of the company. 

The objective of Compliance is to ensure, in conjunction with certain sectors of a company, the adequacy and strengthening of the institution's system of guidelines to laws and regulations. It can also be understood as a set of procedures aimed at complying with legal rules and combating ethical deviations in corporations. 

Compliance has an obvious bias of compliance with legislative standards, related to compliance and compliance with laws, guidelines, and regulations, but that is not all. The implementation of the program in an organization will ensure that there is greater control over the processes, which will be able to mitigate risks and act in the verification of more transparent performance practices. 

We can make an important distinction between Compliance and Corporate Governance, although the concepts are related. The latter is the group of strategies used by a company to demonstrate its value and commitment to shareholders and customers. 

The objective of Corporate Governance, therefore, is to guarantee the responsible and ethical management of the company, following the obligations established by the regulatory agencies.   

Compliance, on the other hand, relates to effective actions to combat fraud and a continuous effort to adapt to the laws.  

What is the difference between risk management and compliance? 

Distinguishing Compliance risk management effectively can be a little tricky, as both tools aim to combat structural damage and comply with legislation. But it is possible to draw comparisons, based mainly on another way of looking at the two processes, respectively: the need to avoid risks and ensure the effective implementation of the combat tools. 

What really matters is that joining the two tools will generate competitive advantage and add value to your business. Compliance with established rules and regulations (Compliance), after all, is directly aligned with the protection of companies against risks that could lead to disregard of the current rules. 

In this way, we can say that risk management relieves Compliance work and facilitates its implementation without causing major disruptions to the company's activities. An organization cannot really have a robust risk management program without Compliance - and vice versa. 

In this sense, Compliance is the satisfaction of all requirements related to risk management for the business and exemplary compliance with the rules and rules so that the company is not compromised. The company's sustainability is also guaranteed, ensuring the interests of stakeholders, employees, and customers. 

While risk management is related to a more strategic procedure, Compliance is more incisive. Risk management depends on analysis to circumvent risks or, at the very least, mitigate process failures. Compliance will work decisively with possible fines and penalties, for example, as well as remedy the damage to reputation related to management failures. 

Thus, risk management is more predictive and less reactive. This methodology must be able to predict the impact that possible failures can cause to the company and it also encourages new procedures to minimize risk situations and establish combat actions and seek improvements. Compliance, on the other hand, is more prescriptive since organizations must adhere to the rules and standards already in force. 

Risk management is a policy that is part of several corporate processes. It allows businesses to have a more solid routine, in which the company avoids losses and problems in delivering results. With the digital transformation taking technology to several processes, risk management has also started to influence IT governance processes. 

This is because as IT becomes a means to provide higher quality services, it is essential that the company can integrate technological solutions into its day to day without compromising the viability of its operations. That way, it is possible to be more competitive and efficient without taking unnecessary risks. 

What is risk management? 

Risk management is a management policy aimed at mitigating the factors that can lead the business to have occurrences that lead to financial and commercial losses. In other words, it works to control, identify, prevent, and mitigate all points that may compromise the reliability of corporate routines, as well as causing failures and interruptions in the workflow. 

This process goes through all the company's activities. In investments, for example, it prevents the company from purchasing a low-cost tool. 

In processes with safety risk, it helps professionals to work with less chance of an accident occurring. In technology, risk management can prevent security vulnerabilities from being frequent and the company from decreasing availability in the IT infrastructure. In all cases, it makes the work environment more efficient and prepared to deal with risky scenarios. 

What is IT governance? 

The IT governance policy is a set of processes related to the way the company performs the management, control, monitoring and maintenance of the entire hardware and software infrastructure of the business. In this way, the technology can be integrated into several corporate routines without creating bottlenecks, quality problems or even failures in the integration between teams. 

In other words, IT governance ensures that the IT infrastructure has maximum availability and performance, on an ongoing basis. This guarantees managers the ability to deliver good results, using innovative solutions and aligned with the business objectives, that is, IT will become an integrated tool throughout the company's operational chain. 

How does risk management relate to IT governance? 

Risk management is one of the components of IT governance and a company that does not think of these two concepts in a unified way will always run the risk of creating new security holes and points that could compromise its performance and the quality of its services. 

This is because once IT becomes part of the company's daily routine, the risks associated with the misuse of technology become a reality that deserves the managers ' consideration. After all, if poorly managed, software, network devices and even smartphones can become the key to security threats and malicious people. 

Therefore, the business must always consider that good governance is done with the support of risk management. From the viability of new investments to the way in which each configuration contributes to creating new risks, it is essential that the company is prepared to deliver to its professionals a robust, reliable, high-performance technological apparatus with a low level of security breaches. 

See also: Risk assessment and prediction tool 

What are the steps to optimize risk management from the IT infrastructure? 

To optimize risk management and align it to IT governance, the company needs to adopt some practices. They allow the two policies to be integrated more easily, avoiding security problems and the quality of internal routines. See some key points below! 

Always consider the viability of investments 

Every IT investment can have risks. Therefore, when choosing to purchase a new tool, assess the feasibility of the expense and how it will affect the company's routines. 

For this, it is important to consider the internal demands, the profile of the company's operations and its medium- and long-term objectives. It is also essential to identify how the new solution will be integrated, the costs of its installation and maintenance in the medium and long term. That way, it will be easier to assess whether it is worth purchasing new software or hardware for the business. 

Assess security risks 

Always consider the security issues that can strike the business when adopting a new tool. Considering each risk factor, the company can easily define preventive, monitoring and breach mitigation measures and, thus, prevent the new solution from negatively impacting users' privacy. 

It is also important to think about digital security from the existing infrastructure. Risk management must always consider how IT governance can contribute to the business having a more or less secure environment, that is, the way in which the configuration of the infrastructure can lead to new failures in the medium and long term. This will assist in the optimization of the digital environment, with more effective and accurate control and monitoring processes. 

Integrate teams responsible for IT governance and risk management 

IT teams and teams responsible for risk management must always work hand in hand to ensure that the impact of their actions is the best possible. Therefore, it is essential that there is good integration between the teams, with leaders working together to achieve the same goals. 

Therefore, create an integrated operating structure. Communication and alignment of objectives and goals must be continuous. Thus, everyone will be able to work to have an infrastructure that is efficient and, at the same time, safe and of high performance. 

As companies digitize their daily routines, IT governance is taking a strategic role within the corporate environment. Having a quality operational flow, in which technology can actively contribute to improving corporate results, has become fundamental. 

But the use of tools like cloud computing and Big Data can expose the company to risks. When these technologies are poorly managed, the company is at risk of data leaks and, therefore, losing business. 

Therefore, it is essential that risk management is always thought alongside IT governance. This will ensure that the company can take more advantage of the benefits of digital transformation, such as increased innovation and mobility. In other words, the company will be able to achieve solid commercial results with more security and quality. 

In the business environment there is not much scope for errors or problems that hinder the company's development and productivity, so financial management software is indispensable. 

In addition to automating your business processes and increasing the security of information storage, there are many other benefits that financial risk management software can offer to your company.  

10 benefits of financial risk management software 

1) Reduce your operating costs 

The purchase of financial management software can be considered an investment, since in the medium term it is possible to recover your money through the savings that the tool provides. 

Various costs that are part of the company's budget can be reduced or even eliminated. For example: expenses with printing (ink, paper and energy) of documents, additional hours for employees, among many other expenses. 

2) Optimize your financial controls 

It is possible to optimize the financial control of the company, because a financial management software allows the accounts payable and receivable of the company to be organized in a detailed way, such as by date, priority, category, supplier, customer, etc. 

In addition, you will never again miss the payment or receipt deadline, as the system sends notifications to the user. 

3) Increase your company's productivity 

The financial management software allows other departments of the company to be integrated into the same system, causing productivity to be significantly increased and avoiding the divergence of information between sectors. 

4) Optimize processes 

Your company's finance and accounting processes become much more efficient, agile and accurate when automated through a financial control ERP. 

5) Offers protection against human error 

Most of the administrative problems are caused by human error. Inconsistencies of data and wrong information cannot be recorded in the system, in addition to the fact that the software will warn if there is a mistake. 

6) More security in data storage 

Storing your company's financial data on physical media such as CDs, flash drives, printed documents or HD can be dangerous, as a system failure or a minor malfunction is enough for valuable information for your company to be lost in a matter of seconds. 

The financial management and control ERP can store all your data in a cloud computing system that can be accessed remotely. 

7) Efficiency in stock control 

Tracking your company's inventory through Excel spreadsheets can be very laborious, offering risks of human error and inaccuracy. 

A financial management ERP allows your stock to be integrated into the system and updated in real time as each product is sold. 

8) Accuracy when detecting failures 

As we said above, human failures are one of the main internal factors that can compromise a commercial operation, but unfortunately, they must be considered in your strategic planning, after all, we are all subject to making mistakes. 

However, a financial management system allows faults to be detected more precisely, preventing the operation from suffering irreversible damage. 

9) More details on access to information 

The financial planning system allows you to have access to detailed information about your business, which allows you to know exactly what the company's real situation is. 

In addition, it is possible to have access to reports that show the monthly, half-yearly or annual financial performance of your enterprise. 

10) Assistance in making strategic decisions 

Performance reports play a decisive role in making strategic decisions for your company. Through efficient financial management software, it is possible to have access to the results that your business is presenting at any time. 

It is also possible to analyze your sales, which products are selling less or more, which expenses are weighing more on the company's budget, among many other information. 

These are just some of the benefits your organization can expect once it implements financial risk management software. The least expensive way of getting access to risk management technology is to use a cloud risk management solution. Cloud solutions do not require an extensive and expensive implementation; they run off the cloud, which means that your organization will not have to worry about purchasing and maintaining the hardware and network infrastructure required to run the solution.  

The payments are also easier – instead of making a huge payment to purchase the solution, your organization will only have to pay a small monthly fee to continue using the solution. All the maintenance required to run the solution will be the responsibility of the solution provider. If you are hesitating about implementing a full risk management solution you can start out with something smaller. Look at risk analysis and monitoring tools. Once you are sure that your business will be able to generate a good return on investment on the solution you can expand your subscription and get access to more risk management tools. 

Risk management actions are important for all businesses, regardless of their size or segment. 

To understand this, just remember that, whatever the process in your daily life, the risks represent uncertainties regarding the results achieved. It may be the risk that the raw material will run out, that a machine or equipment will stop working, that a tool will fail, that productivity will fall, in short. 

As much as you use accurate data when making your projections, it is impossible to determine with 100% certainty what will be the effects derived from your team's actions. These uncertainties can either disappoint you in the end, but they can also surprise you positively by presenting better results than expected. 

Thus, we understand them both as risks and as potential opportunities. 

In the same way that uncertainty is able to bring a positive balance, adding value, it can result in a failure or defect, affecting the quality of delivery to the customer and, consequently, the company's image with the public. 

Within a bank, bank risk management is the sector that is responsible for planning, executing and measuring actions to verify and mitigate existing threats. In other words, the area seeks to maximize the chances of success for the project and even for the business itself, focusing on uncertainties to avoid negative situations and seize opportunities. 

According to the international standards, risk management must protect and create values ​​for the company based on its actions, becoming an integral part of the daily production, in order to contribute to decision making. 

This is only possible when the professionals involved are free and willing to face uncertainties explicitly, without fear of contradicting anyone inside the company. Work must be systematic, maintaining a routine in your daily actions, while preparing to deal with positive risks, which are business opportunities. 

The dedication needs to be constant and the manager must make sure that he is equipped with all the relevant information inside and outside the company to make the decisions that will guarantee greater productivity. This improvement in quality , however, cannot come at the expense of the health and well-being of workers - which, in itself, would be a huge risk for the company. 

Whoever proposes to manage risks must be aware that cultural differences will exist and, therefore, it is necessary to be prepared to deal with situations in a transparent manner, always valuing the dynamism to maintain an inclusive management. Finally, all of these principles unfold in an organizational culture that empowers workers and ensures continuous improvement in processes. 

What is the objective of risk management? 

The main objective of risk management, as the term suggests, is to reduce negative risks and make the most of the positive risks that are presented to the company. Secondarily, it also acts as an instrument of regulation and balance between the actions of the organization and its appetite for risk. 

In other words, the area helps the manager to understand whether the strategies adopted by his business are aligned with the availability of taking risks. After all, is the company in a position to take risks or does it intend to adopt a more conservative stance? 

During the process, mistakes and successes will also provide greater clarity as to which are the most appropriate responses to deal with risks, in order to reduce waste and operational losses. It is important to keep in mind that, in general, risks do not appear in isolation within the processes. 

This means that the same error or failure can affect several parts of an organization - individual or general risk - and that it is necessary to be prepared to identify these issues, proposing solutions capable of resolving the error in a broad way. In the end, a management that is prepared to deal with risks is able to make better use of opportunities, optimizing productive resources. 

No matter what the segment or business model, entrepreneurship will always be a risky activity. Whether you are launching a new business or if the challenge is to keep a company already consolidated in the market strong, threats will be present. 

However, there are still actions that every company can implement in their daily lives to make sure that, as they arise, uncertainties will be dealt with in the best possible way. 

It is precisely at this moment that risk management comes into play. 

As we have seen so far, the area is responsible for planning, executing, monitoring and mitigating production errors, acting on opportunities and creating strategies to maximize results and minimize failures. So, even if you plan all the details, the risk will always exist, which requires knowing how to deal with each situation when identified. In this sense, risk management is extremely important, as it can be the differential for the success or failure of a project or business. 

The risk management process is inherent in any project. When we develop a plan, we think about what can go wrong and devise ways to minimize problems. Therefore, the process itself needs to be simple and effective to avoid complexity as a risk enhancement factor. 

Although, described in this way, the risk management process may seem difficult to elaborate, it can be easily understood. Therefore, we will explain it focusing on the impact of new technologies on its execution. Thus, we will be able to transmit practical and current alternatives that will greatly facilitate your work. 

The current scenario of risk management 

Before starting the steps properly, it is essential to contextualize the current scenario. This is because the new technologies bring numerous benefits, but also add new risks - mainly in their pioneering versions, when they have not yet been sufficiently tested. 

Security risk is among the most influential today. The phrase even sounds contradictory, since security has the function of avoiding problems. However, the current availability of data, for example, exposes the privacy of each of us in a way unthinkable a short time ago. 

Managing this type of risk is extremely important and does not only affect large companies such as Facebook, WhatsApp and Google. It is difficult to design a business that currently does not maintain data about its customers and suppliers, in most cases in the cloud and vulnerable to some extent. 

Still, a   KPMG survey on the topic in 2017 revealed that, in the technology area, 72% of companies only allocate a risk team after a problem has occurred. Almost half of the respondents still claim that they use devices and applications without any risk assessment and 50% of companies use obsolete data. 

It is understandable that it is so. After all, the urgency for agility above all, in the digital transformation, is evident and the risks are a hidden possibility. That is precisely why the risk management process is important. It highlights the possibilities of problems, classifies them and determines the prevention and correction procedures. 

The stages of the risk management process and the technology 

1. Risk identification

Although the need to start relating risks is elementary and, as we said, it is a natural activity in the elaboration of projects, this first stage is one of the most impacted by technology and digital transformation. 

Features like Big Data, Artificial Intelligence (AI) and the Internet of Things (IoT) are changing the way we collect data and predict problems. Big Data expands the source of information, AI automates the collection and the IoT monitors different occurrences, such as the increase in temperature in equipment and the lack of items in stock, for example. 

The conventional process of raising risk information with those involved in the process remains important, but it is now possible to go further and, at the same time, confirm the team's suspicions and fears with the help of technology. 

2. Risk analysis

With the related risks, it is time to analyze them seeking to identify the extent to which each of them can occur. Obviously, we are not talking about a guessing process and, many times, not all variables that can influence the occurrence of a problem are available. But with the definition of varied metrics it is possible to obtain a very reasonable forecast. 

Currently, a large part of this process can be automated, and the analysis can be expanded. The algorithms are being developed with an   increasing capacity for intelligence and it does not make sense to limit yourself in this field. Even statistical analysis programs have evolved a lot and are much more accessible. 

3. Prioritization of risks

Based on the analysis, it is easy to relate the risks according to the characteristics of high, medium or low. The most significant are those that can interrupt your project or imply high costs. At the same time, it is also essential to determine those who need a more immediate response. 

In this respect, technology has helped with more advanced and effective forecasting capabilities. The Business Intelligence is based on rich and available real - time data in various sources. 

4. Definition of the person responsible for the risk

Any task that is not assigned to a specific person can be done by anyone. At the same time, everyone is likely to expect it to be performed by someone else. Risks are no different. Assign a person responsible for each risk, preferably according to each person's ability to prevent the occurrence of that problem. 

But the involvement of each employee cannot depend only on an order. He needs to assimilate the culture of prevention and availability of dedication. Automating some of his tasks is crucial for him to have time to maintain his focus on more strategic actions, such as risk management. 

5. Risk response

The answer to risk involves questioning its positive use. After all, some problems can be explored to improve the project, redesigning procedures or applying incremental innovations. 

Here, perhaps, we have the greatest practical influence of technology in risk management. This is because this positive response to risk is one of the characteristics of technological solutions. Data released using robot software (RPA), for example, prevents human errors. So, it is with all types of automation. 

6. Risk monitoring

Monitoring is an ongoing procedure that needs to be based on metrics. The person in charge must accompany them as an airplane pilot observes the aircraft panel. Variations in some registries can give clues to increase the probability of risks and allow proactive actions. 

To conclude, it is worth mentioning that the risk management process is no different from many others. To put it into practice, it is essential to create an organizational culture that makes its importance clear, as it depends on people to function. Unsecured profit is never sustainable indefinitely, as small problems can take on large proportions. And who wants that for your business? 

The number of fintechs has been growing significantly, introducing the market once and for all to the era of digital banks. Created by the absorption of technology (tech) in the structure of the financial sector (fin ), they are revolutionizing traditional banking services. However, despite their business advantages, fintechs are not unaware of the compliance-integrity risks that the banking sector already faces. 

We are talking about bank compliance monitoring and testing for fintechs - a concern that can avoid regulatory problems and economic barriers in the enterprise. Thus, we wrote this post in order to alert entrepreneurs and investors about risks and compliance solutions for the sector. We will talk about digital transformation in the financial market, about banking competitiveness and, of course, what the legislation says about fintechs. 

How has the digital transformation impacted the financial market? 

Fintechs are companies that optimize services in the financial sector using technology, which has been impacting the market in recent years. 

Usually in the form of start-ups, they have revolutionized banking services, generating facilities and savings for users. 

Let's understand some impacts of the news: 

Increased use of artificial intelligence 

Artificial intelligence (AI) consists, in general, in the use of technologies that simulate the human capacity to perform operations. 

Its application has reinvented the financial market infrastructure, improving the provision of services to consumers. 

We can exemplify its use in operations such as: 

• possibility of providing loans to consumers who are excluded from traditional scoring systems. 
• new ways of identifying the possibility or intention of repayment, which reduces the default rate. 
• calculating loan risk more quickly, fairly and accurately. 

Fintechs, compliance and the development of regtechs 

Regtech is an abbreviation for Regulatory Technology - or “regulatory technology”, in Portuguese - and represents a market that invests and develops technology to improve compliance requirements   

The concept arose mainly due to the advances of fintechs, companies that, despite being disruptive, must follow the regulation of the financial and banking sector. 

The needs gave rise to innovations and technologies that seek to facilitate the compliance of fintechs to regulatory standards, for example, the Central Bank, the CVM etc. 

In that sense, Regtechs have the potential to reduce costs, increase efficiency and improve the user experience. And the novelty helps the financial sector not only in terms of regulation, but by preventing money laundering, by automating onboarding and by preventing fraud. 

How can traditional banks compete with fintechs? 

There is no way to stop the technology: those who do not adapt will be obsolete in the market (or will lose a large share of it). 

For this reason, traditional banks are also developing innovations to meet digital demand and, consequently, guarantee their competitiveness. There are large institutions, for example, launching digital banks, in order to simplify the management of money and investments. These technologies use algorithms to understand how the user acts and assist in their decision making. Other banks are launching personalized services, by which users can open digital accounts and enjoy the convenience and agility. 

In other words, in short, all players must absorb technology in its structure and activities, or they will be left behind. 

Banking compliance for fintechs? 

After all, what is compliance for? In a nutshell: to be in compliance. 

This means both complying with regulation and developing an ethical organization, which aims at efficiency in a safe manner. In the case of fintechs and other agents in the financial market, the regulatory aspect of the sector is very detailed about its activities. 

Therefore, industry institutions - such as fintechs - must structure their security policies in accordance with the regulations. Specific registration controls, analysis of the cause and impact of incidents, data traceability, protection of sensitive information - these are many requirements, aren't they? 

For this reason, when preparing its information security policy, it is ideal that fintech has the assistance of professionals who know the details of the legislation. In this way fintech companies have also created a new career option for people working in compliance. Instead of working directly in compliance these people can now help develop the technology that will power the future of compliance 

It is easy to operate a business in a stable environment. Businesses can ignore a few risks because they know that in the grand scheme of things, they will be fine. However, a crisis like the current coronavirus outbreak completely changes the equation. Businesses are currently reeling from the impact of the outbreak because they cannot cope up with the dynamic nature of this emerging risk. 

The coronavirus outbreak’s risk is something known as the black swan in the world of statistics. The story goes as follows – swans are always white; thus, everyone can bet on the swans being white. No one will ever lose money if they bet it on swans being white.  However, explorers ended up discovering black swans in Australia. The idea behind the black swan is that sometimes things that are statistically improbably will become reality. That is just how things work. Some things which should have never happened will end up happening. 

The coronavirus outbreak can be considered a black swan because nothing like it has been seen in the modern era and no one could have predicted it. The government in China had no idea when the outbreak started because it was a new strain of the coronavirus disease and they had no way to understand how far it will end up spreading. Similarly, governments all over the world found themselves being blindsided. The list of infected countries keeps growing and some of the countries are even talking about a nationwide quarantine. The question then remains – if you cannot anticipate a risk, how can you deal with it? The answer lies in faster risk mitigation activities. 

Containing a risk 

Once a risk has been actualized – like the current coronavirus outbreak – there is little that can be done to bring things back to normal. What really matters is to take the right decisions at the right time. When you look at all the countries that have been infected you will notice that a few of them seem to be recovering well. The number of cases coming along every day are decreasing instead of going up. The common thing between such countries is the severity of their response. They chose to contain the risk just as the virus began spreading and were thus able to limit its transmission. 

Businesses need to look at risk management in the same context. There will always be some risks which cannot be predicted. If a risk cannot be predicted it cannot be prevented either and the only response is to react quickly enough to minimize the damage.  

This isn’t just a question of having the right attitude when it comes to risks. The right attitude will only be useful if the right tools are also present. Risk management technology has recently become very common in the financial sector and once you look at the current crisis it is easy to see why that happened. Risk management solutions help businesses quickly mitigate risks by coordinating their actions across the organization under the unified risk management platform.

Moving faster 

Businesses also need an activity management solution if they truly want to contain unpredictable risks. The executive branch of the office must be able to control the steps being taken to contain the risk. The problem is that they have no way of ensuring that all the work is progressing at an acceptable pace. They must rely on the reports and information delivered to them by the managers working under them and cannot directly monitor task progression. 

This isn’t acceptable for any organization that wants to be able to move quickly. It is essential to have a risk management solution (such as Insight360) that includes activity management. Managers should be able to define tasks and assign them to employees through this system. The executive branch should be able to view the status of such tasks across the organization and be able to intervene wherever required. 

The current outbreak tells us that we need to change the way we manage risk and become not just more proactive but also more reactive. Businesses need to ensure that they are ready to deal with a major risk and can quickly implement a plan which would ensure that the business survives the crisis. 

Most small businesses do not need to worry about compliance too much – the rules and regulations that form the small business regulatory framework are relatively simple. However, there are certain industries where these regulations are complicated and if a business becomes large enough in any industry it starts to need better compliance tools and technology. The reason compliance is such a crucial part of any such organization is that it controls what the business can and cannot do. A misstep in compliance can result in harsh penalties – from monetary fines to the cancellation of the business license.  

The penalties that an organization can expect for a compliance violation depends on the damage a violation can cause to society. Small violations, for instance about the allowed signage in a business, generally result in slight penalties. Sometimes the business may get away with just a warning to fix the issue before the next inspection. The financial penalties levied in such a scenario are also not severe, generally limited to a few hundred dollars, which is not a major problem for any business that can generate even a small profit.  

Where compliance truly matters 

There are some industries where a compliance violation can cause a lot of damage to the environment and people. Think of the healthcare industry – a mistake in the healthcare sector can result in someone losing their life or suffering some sort of a permanent disability. That is why healthcare businesses focus so much on compliance – they know that the cost of making a mistake is too high. The same is true for the energy sector, particularly the businesses involved in oil, gas, or nuclear power generation.  A mistake in an oilrig can cause hundreds of millions of dollars of damages. It can also release millions of gallons of pollution in the ocean, resulting in permanent harm to the ecology of the area. 

The same is true for businesses in the financial sector, one of the most heavily regulated sectors of the economy. Now, it may seem like the stakes are vastly different when it comes to the financial sector businesses. They cannot kill anyone through their policies neither can they release a lot of pollution, the worst that can happen is some monetary damage, then why is the sector so heavily regulated? Most people who were adults in 2008 will be able to tell you the simple answer to this question – the financial sector is, perhaps, the most vital part of our economic system and a shock to the sector results in reverberations being felt all around the world.  

Building a better system for compliance 

When an autopsy of the 2008 financial crisis was performed, the most surprising discovery is how much of it could have been avoided. The problem was with information silos – all the warning signs were present for those who would look for them, but since they would only be visible when investigated, no one knew they should be looking for them. The documents and figures which showed that the derivatives market was weak were hidden out of reach to the rest of the market. That is why since 2008 so much time has been spent on creating solutions that would automate monitoring. 

Automated monitoring is essential in compliance because it acts as the first line of defense. Even if people make a mistake, the system can catch it. Most large enterprises already have enterprise  compliance management solutions in place. This helps them any compliance violations as quickly as possible so those violations can be resolved before they are added to the system. This technology was out of reach of smaller businesses, because it cost millions of dollars to implement and then maintain. The biggest banks in the country could easily invest millions of dollars for compliance. 

The technology is finally in the reach of small businesses too. They can now simply implement a single platform which controls compliance information all across the organization. This means that the person at the bank who is signing up a new customer will enter information into the same platform being used by the chief compliance officer and the board. This means that if there is any information which should be visible at the top, it becomes instantly available to all the stakeholders in the organization. As these systems become more intelligent and the cost gets even lower, almost every business will implement compliance monitoring technology. 

What is risk management?  

Risk management is the process of planning, organizing, directing and controlling an organization's human and material resources, in order to minimize or take advantage of the risks and uncertainties about that organization. 

Uncertainties represent risks and opportunities, with the potential to destroy or add value. Enterprise risk management software for banks enables managers to effectively address uncertainties, as well as the risks and opportunities associated with them, in order to improve their ability to generate value. 

The value is maximized when the organization establishes strategies and objectives to achieve the ideal balance between growth and return on investment goals and the risks associated with them, and to exploit its resources effectively and efficiently in pursuit of the organization's objectives. 

Corporate risk management deals with risks and opportunities that affect the creation or preservation of value, being defined as a process conducted in an organization by the board of directors, management and other employees, applied in the establishment of strategies and formulated to identify across the organization potential events, capable of affecting it, and managing risks in order to keep them compatible with the organization's risk appetite and provide reasonable assurance of the achievement of its objectives. 

Events can have either a negative or positive impact, or both. Those that generate a negative impact represent risks that can prevent the creation of value or even destroy the existing value. Those with a positive impact can counterbalance those with a negative impact or they can represent opportunities, which in turn represent the possibility of an event occurring and favourably influence the achievement of objectives, supporting the creation or preservation of value. 

Main purposes of risk management 

Align risk appetite with the adopted strategy - managers assess the organization's risk appetite when analysing strategies, defining the objectives related to them and developing mechanisms to manage these risks. 

Strengthen risk response decisions - corporate risk management enables rigor in identifying and selecting alternative responses to risks - How to avoid, reduce, share and accept risks. 

Reduce operational surprises and losses - organizations acquire a better ability to identify potential events and establish responses to them, reducing surprises and associated costs or losses. 

Identify and manage multiple and cross-enterprise risks - every organization faces a range of risks that can affect different areas of the organization. Corporate risk management enables an effective response to interrelated impacts and, also, integrated responses to the various risks. 

Seize opportunities - by considering all potential events, the organization is positioned to proactively identify and seize opportunities. 

Optimize capital - obtaining adequate information about risks allows management to conduct an effective assessment of capital needs as a whole and to improve the allocation of that capital. 

The role of risk management in business success  

Risk management and automated risk assessment isn’t merely done as a preventative measure – it plays a crucial role in making an organization successful. The most basic way it does this is by keeping the business safe. IF a business is not managing its risks then it is not prepared to meet any risks. This means that a risk can end up dealing a fatal blow to the business or completely evaporate its profits by causing a huge financial loss.  

Risk management also lets organizations know about new opportunities. When businesses closely study risks, they are more aware of the way the market is moving. Instead of simply protecting themselves, they can exploit the upcoming changes to leapfrog the competition. This wasn’t always possible because risk was previously managed manually. When you are manually managing risks, it is very difficult to get any useful insights out of the risks. It is hard enough to manage the risks alone, to think of getting insights out of them is plain impossible. 

This scenario has now changed thanks to risk management technology. There are solutions which take in risk data from inside the organization as well as the external environment of the organization and automatically analyze them. These solutions can detect risks quickly and alert all the stakeholders within the organization. Thus, businesses can use the risk data already present in their risk management framework to determine what the best course of action will be soon. This is also why so many businesses are now investing in risk management technology. 

When talking about running a business, one of the most important points that must be addressed is in relation to business risks. When mistakes and accidents happen, the company can face heavy losses in different avenues such as productivity, finances and, in some cases, its image in the market. 

However, the good news is that most failures can be avoided through knowledge and planning. Thus, measuring, controlling and forecasting are important steps so that work processes are efficient, and the organization is able to keep its systems optimized. 

Read on and find out about some of the main risks your business is subject to! 

Tax risks 

Tax risks relate to legal obligations related to declarations and taxes. An example is to submit the declaration with wrong or late data and receive a fine for that. Also, not issuing invoices in accordance with the law, which could cause the company to be accused of tax evasion. 

To get rid of this impasse, it is essential to have a detailed tax planning, in order to define the business procedures to meet these responsibilities and structure the dangerous points. Having help from a trusted accountant also helps make the organization less vulnerable to these failures. 

Operational risks 

Operational business risks are defined as those resulting from failures in internal, external processes, systems and people, which together constitute an organization. They are specific to each environment. So, a gas station, for example, has the risk of exploding if the fuel is not stored properly. A bank is in danger of being robbed if there is no effective security system. 

There are a few ways to avoid such threats. One is to carry out a mapping of the processes, in order to identify those weakest points and, with that, apply mitigation techniques. At this point, it is essential that the company adopts compliance actions as a standard of organizational behavior. 

Some of the details to be evaluated are infrastructure, people, IT, routine activities. In infrastructure, it is advisable to analyze possibilities of landslides and floods, for example. In people, conflicts, corruption. In IT, the likelihood of losing important data. In the activities, it is recommended to know the step by step of the main departments, such as HR and the purchasing area. 

Financial risks 

As the business grows, the financial management becomes more complex. While at the beginning, the manager can manage to balance the finances on his own, possibly he will need help when the enterprise is already more developed. 

The goal is always to make the gains outweigh the expenses. For this, a lot of monitoring is essential. In cash flow, for example, it is necessary to make an adequate projection of the inflows and outflows, so that operations are always in the blue. This is because it is common for customers to make purchases in installments and, before these funds enter, the company needs to make payments to suppliers or employees' salaries, for example. 

Thus, in order to avoid such financial business risks, the manager needs to comply with certain actions, such as time adjustments and payment with suppliers, in addition to seeking savings in common expenses, such as water and electricity bills. 

Cyber ​​risks 

Having a safe digital behavior and investing in the protection of the company's systems, with antivirus and firewalls, is essential to prevent important information from being stolen by malicious people .Another recurring situation is in companies that receive payments and see themselves as targets for information theft from customers. In these situations, it is recommended to invest in cryptographic stamps and certifications for the websites, in addition to a payment system that offers protection in transactions. 

Risks in the workplace 

It is the obligation of every company to offer a safe work environment that will free workers from accidents and occupational diseases Thus, they need to take care of physical (such as noise and extreme temperatures), chemical (such as toxic substances) and biological (such as viruses, bacteria and protozoa) risks. In addition, ergonomic risks (such as repetitive activities and inadequate posture) and accidents (such as explosions, fires and falls) are also the focus of attention when it comes to occupational health. 

It stands to reason that business risks cannot be completely eliminated. However, it is essential that each organization does its own planning and study of the environments, so that the main threats are avoided. Effective management contributes to financial health and business success. 

Read out our blog about Audit risk model also.

We easily live in one of the most exciting eras ever. The rapid pace of technological development we have experienced has went beyond anything that used to be possible. If you go back a century, the pace completely changes. Think about it – there would be a new notable technology maybe once a decade. The reason progress was so slow is simple – everything had to be done manually. All the calculations had to be done by hand, all the products had to be made either by hand or measured by hand to ensure they were made according to the exact required specifications, and there was no possible way to run simulations. 

Compare that to what we have now. Computers can calculate everything a thousand, maybe even more, times faster than humans ever could. Our machines can now build things based on exact measurements, thanks to sensors and computers built into the machines. We can also simulate how different things will work within digital systems before we ever spend resources to manufacture them. All this has resulted in our technological capabilities increasing exponentially.  

Risk management has also developed exponentially as new technology was made available to risk managers. The way a risk manager works now is very different from the way risk managers worked just a decade ago. Let’s take a closer look at risk management processes and how they have evolved. 

Risk Management before Information Technology 

Understanding the way risk management practices have changed is only possible if we first look at how things used to be. If we go back before the advent of information technology, specifically the era before computers became a common sight in offices, risk management was a very hard job. It has always been critical for businesses to manage the risks that they face, and most businesses had risk managers who were assigned the responsibility of tracking and managing business risks. 

The problem was that there were no tools to help them to their job. Managing risks requires monitoring the way business processes are being carried out, looking at market risks, keeping track of all known risks, and discovering new risks. Take a moment to think about how you would go about doing this job if you did not have access to a computer. 

You can, theoretically, keep track of everything by keeping notes you have handwritten or typed. However, you couldn’t do much with the information you had. If you wanted to do any type of analysis on the data you had, you would have to manually note down the data and then do all the calculations by hand. This would take a lot of time and resources.  

Secondly, there was no possible way to keep track of risks. You had to go to different business units, or contact them over the phone, and ask them to provide you the latest performance metrics. This meant that you would also need the different business units to keep track of performance metrics, which is in itself extremely hard to do without any digital systems. The risk managers of this era could only track the biggest risks and could often be blindsided by risks they had no way to track or mitigate.  

Risk Management with Information Technology 

As businesses got access to computers and office productivity software solutions, the situation changed. Risk managers could now keep information in digital documents, from where they could extract information with a simple copy and paste function. Keeping track of things also got exponentially easier thanks to spreadsheets. Spreadsheets also made it possible to analyze the data which the risk managers had recorded. 

This had a profound effect on risk management. It was now possible to track and analyze risks to create business intelligence. Many risk managers are still using general-purpose solutions to keep track of risks. They record the required data in multiple documents and spreadsheets. The data is then combined manually into a single report which is then presented to the board. 

The rise of risk technology  

The rise of information technology provided tools that could be used to manage risks. However, even that step was decades ago, and we are now on the next step. There are dedicated risk management solutions which have built-in workflows for risk management. These solutions also deliver enhanced risk metrics, and functionalities like a live view of current risks, which isn’t possible if spreadsheets are being managed manually. Every year these risk solutions become smarter, and we can expect them to keep getting better in the upcoming years.