Responding to a demanding regulatory environment

Major focus in this business situation.

Representative Business Situation – Problem Statement

Need to Strengthen Three Lines of Defense

With increased focus on operational risk management, review for strengthening three line of defense was necessary.

Fragmented View of Operational Risk

Multiple product lines, geographies and customer segments. Wide geographic dispersal of operational and processing centers with center of excellence responsibilities. Integrated view of operational risk and controls necessary.

Lack of Insights into Controls, Cost and Service Delivery

Control environment very important in the context of three lines of defense. To be balanced with the addition to operational cost. To verify controls do not result in degradation of service to counterparties and clients.

Unknown Process Vulnerabilities

Management had done many reviews and assessment of operational vulnerabilities. Large risk registers with bespoke controls. Categorized vulnerabilities important to assess efficacy controls across risk dimensions.

Representative Business Situation – Maven Methodology

Examining the current control environment with a view to increasing the effectiveness of controls. Given a global presence and multiple processing centers, the organization is looking for a consolidated view of operational risk and its management.

Management Consoderations

  1. Where do specific vulnerabilities arise in the organization’s operations?
  2. Consolidated view of operational risk – with the ability to identify risk by business or by vehicle, or by operations center
  3. Demonstrate the control environment as being able to manage the risks, with specific actions and responsibilities
  4. Creating a control environment that is adequate (3 lines of defense), measureable and forward looking
  5. Clear understand of the cost of control and the impact on customer delivery

Solution Methodology Driven by Maven

  1. Examine the vulnerabilities in the process as articulated by management objectives.
  2. Identify where the vulnerabilities are in the process and create a relevant portfolio of exposure; Locate if the process has adequate compensatory controls
  3. Select from library of controls depending on the risk categorization of identified vulnerabilities
  4. Create a metrics framework to look at control effectiveness as well as residual risk
  5. Business case and impact on service delivery through cost of controls

Continued build of the digital model to evaluate (a) risk by specific legal vehicle, and (b) creation of KRIs by operations centers

Result – Superior Risk Management with Lower Costs and Better Service Delivery

Compared to the traditional methods of risk assessment and performance improvement, better results were obtained in very short span of time. This can be attributed to 8 success factors.

Maven results follow the PROFITS framework

If would help to familiarize yourself with PROFITS, to understand the results better.

Digital model for quick insights into potential problem areas and challenges in existing process

Developing a digital model based on the process map, business constraints [deadlines, shift timing, volumes] and operational parameters [handling times, dependencies and delays] was the starting point.

Maven provided insight into as-is scenario which identified potential problem areas.

Portfolio of exposure could be easily created from comprehensive view of risks

    Control Review
  • Control objectives and resultant Basel Risks
  • Mapping vulnerable activities to Basel Risk
  • Selection of existing (compensating) controls
  • Residual risk and control KRIs
    Observations
  • All risk-activity combinations already considered
  • 42% of risk-activity combinations have existing controls as part of the process
  • Systems risks are assumed to be out of scope (considered) including implications on Fraud

Maven provided plug-and-play library of controls to mitigate the risks

    Control Patterns
  • Maven offers comprehensive library of control patterns.
  • These control patterns can be easily ‘plugged into’ a process map
  • Different scenarios can be generated easily by moving activities to the new row(s)
  • These controls can then be enriched by quickly adding deadlines for timeliness and inspect decisions for accuracy

Informed decisions could be made about impact of controls, compensatory controls and open risks

Multiple implications on the operational efficiencies were assessed in short span

    Resource estimation for acceptable completion
  • Optimization for minimum resource requirement
  • Adjustment of resource for service deadlines
  • Resource utilization, and completion
  • Review of hand-offs, working hours

Maven provided readymade financial projections which could be directly utilized in business case

    Operational budget and projections
  • Volume and price for revenue if required
  • Detailed capital & operational cost from output
  • Compute each element of cost impact
  • Assess pricing, and profitability

Optimization for minimum resource requirement

TODO: Additional information will be available here to explain the concept. It should be 2-3 sentences.

Adjustment of resource for service deadlines

TODO: Additional information will be available here to explain the concept. It should be 2-3 sentences.

Resource utilization, and completion

TODO: Additional information will be available here to explain the concept. It should be 2-3 sentences.

Review of hand-offs, working hours

TODO: Additional information will be available here to explain the concept. It should be 2-3 sentences.

Mitigation plan for risks in existing Enterprise Architecture was visibly demonstrated

    Enterprise Architecture Analysis
  • Architecture by process
  • Investigate clusters with no digitization
  • Review applications supporting process
  • Investigate data flow and redundancy

Architecture by process

TODO: Additional information will be available here to explain the concept. It should be 2-3 sentences.

Investigate clusters with no digitization

TODO: Additional information will be available here to explain the concept. It should be 2-3 sentences.

Review applications supporting process

TODO: Additional information will be available here to explain the concept. It should be 2-3 sentences.

Investigate data flow and redundancy

TODO: Additional information will be available here to explain the concept. It should be 2-3 sentences.

Organization structure and skillset requirements can be quickly assessed
Skill mix and training requirements

Multiple levels of competency for carrying out different activities

TODO: Additional information will be available here to explain the concept. It should be 2-3 sentences.

Assessing the training requirements and hiring costs

TODO: Additional information will be available here to explain the concept. It should be 2-3 sentences.

Utilizing existing talent pools and evaluating talent pools in the market

TODO: Additional information will be available here to explain the concept. It should be 2-3 sentences.

Evaluating cost to train vs time to hire trade off

TODO: Additional information will be available here to explain the concept. It should be 2-3 sentences.

Strategic understanding of trade off between cost, control and time

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