I recently just finished giving a talk at the Warburg Pincus IT conference in New York on operational risk (OR) and BI â€“ basically what OR is and how BI can help not only monitor it but also manage and mitigate it. Here are the highlights of that talk...
First what is operational risk? According to the Office of CC (insert link), these are defined as:
1. Internal fraud â€“ perpetrated by your employees
2. External fraud â€“ perpetrated by your customers, suppliers, distributors, etc.
3. Failed business processes or procedures
4. Failed HR processes or procedures
5. Liabilities around products or services offered.
How does BI mitigate, monitor or even eliminate some forms of OR?
1. By identifying the OR risks a bit faster than we can do today. If we can detect and stop fraud â€“ whether internal or external â€“ just a little bit faster than in recent history â€“ then we have mitigated the risk associated with it quite a bit.
2. By using sophisticated analytical models to predict potential OR events or situations â€“ sophisticated models of operational risk â€“ causal models, trending and patterning models, even statistical models that indicate the likelihood of OR events happening are being developed today to help with future situations
3. Using these predicative capabilities, we can reduce OR by giving our front line workers the knowledge and intelligence to recognize OR much faster with the added bonus of giving them insight (using the even more futuristic guided decision making) into how to react to and handle the risk.
BI has a tremendous role in mitigating or even eliminating it before it takes root in your organization. However, it will require a new paradigm for BI â€“ the use of these vastly more sophisticated models, pattern recognition, predictive analytics, and guided decision making technologies. The era of in which simple multidimensional analysis is king may be coming to an end!
Posted May 20, 2005 3:33 AM
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