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How Operational Risk Management in Commercial Banking Is Increasing Due to Automation and Data Quality

How Operational Risk Management in Commercial Banking Is Increasing Due to Automation and Data Quality
"""Commercial banking has undergone a significant regulatory change since the financial crisis of 2008 in order to both manage and reduce operational risk. Along with this shift, there has been a stronger emphasis on raising shareholder value, profitability, and overall organizational efficiency.

Dodd-Frank, Sarbanes-Oxley (SOX), Basel II (now Basel III), and the upcoming implementation of MiFID II are established legislation that aim to better how banks defend themselves against challenges to governance, risk, and compliance (GRC).

Artificial intelligence, bots, virtual assistants, and machine learning are already being used to query the data that is already stored (AI). This data can be used to great effect for efficiency, and this development will only accelerate in the years to come. Many of the largest commercial banks in the world are making sizable investments in this field, and it is anticipated that those who continue down this path of automation will acquire a technological competitive advantage.

Recent instances of this include JPMorgan's COIN (Contract Intelligence) technology, which automates the tedious task of reading commercial loan agreements. Previously, this task required 360,000 hours of legal staff time each year. The program evaluates papers in a matter of seconds, is less prone to mistakes, and never takes a break for vacation or relaxation. All of these features are sensible business decisions that assist to save costs and boost profits.

Additionally, CaixaBank makes the most of IBM's Watson to speed up operations. The CIO, Pere Nebot, believes that this investment will pay off: """"Connective computing is the current trend in commercial banking technology, and in my opinion, this will transform how clients engage with banks and make life easier. We will be able to work more shrewdly and provide our customers with greater service thanks to Watson and our connected architecture."" With the help of document automation software, the output of AI systems like Watson can produce and deliver a seamless procedure for the accurate preparation of business-critical lending papers.

Through international expansions, acquisitions, and mergers, many of the largest banks in the world have grown rapidly over the past few decades, and the mechanisms that supervise governance have become rather disorganized and ineffective. According to a PwC report, while many banks have started the transformation process for commercial lending, some have not given enough attention to data strategy in order to meet new regulatory reporting requirements cost-effectively. A bank will also be at a competitive disadvantage if its commercial lending loan origination capability and related data environment are inefficient.

Since commercial banks operate in a data-driven environment, data accuracy is a possible vulnerability and a weak point in the first line of defense for risk management. Companies can easily cut costs, improve accuracy, and streamline processes through automation of data and documents production processes, which also reduces risk. Operational risk in market-related activities can come from a variety of sources, including inadequate or ineffective data management, systems, and processes, claims the British Banking Association.

The real value of ""Big Data"" is found in how to analyze and produce precise customer data in order to achieve better results. This serves as a cornerstone for risk management and has the ability to shift the mindset from ""quality in, quality out"" to ""quality in, quality out"" with a standardized and tidy output format.

As a result, Basel II and SOX compliance is aided in execution and data entry mistake reduction through improved delivery and business process management. The integrity of the data and its quality must not be compromised during processing or output since there will be severe financial and reputational consequences.

The belief that software innovation and new technology have the potential to increase the effectiveness of commercial banking has been expressed by some of the most well-known banking figures in the world. ""If you are the first mover and to disrupt, you may lose some money on one side, but you will be able to grow more aggressively,"" says Ralph Hamers, CEO of ING. The adjustments we've made have made it possible for us to respond to credit requests more quickly, which enhances the level of customer care we provide.

By obtaining more market share, a number of challenger banks (like Metro Bank and Aldermore, for example) are continuing to disrupt the banking industry, keeping bigger firms on their toes and fostering innovation and efficiency throughout the banking industry.

Even the biggest and most established commercial banks can gain a strategic competitive edge by streamlining business operations with document automation. This emphasis on document quality as a core component of GRC, especially in such a data-rich business, should at least somewhat offset the criticism of the previous ten years."""
 

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"How Operational Risk Management in Commercial Banking Is Increasing Due to Automation and Data Quality" was written by Mary under the Business category. It has been read 64 times and generated 0 comments. The article was created on and updated on 16 November 2022.
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