Risk Management 101: A Primer
Risk Management 101: A Primer
Organizations today operate in a constantly changing global environment in which new risks, market shocks, and financial vulnerabilities appear almost daily, affecting both strategic and tactical business decisions. As chief risk officer, you seek to balance risk and rewards through compliance and policy management, insurance strategies, information security, audit services, and fraud investigations.
To be effective, you need transparent risk management. This includes the ability to assess and prioritize risks, identifying those – financial issues, operations, secret product recipes, expansion challenges – that could have the biggest impact on enterprise value. For example, foreign manufacturers that use child labor or unethical standards pose a serious threat to your retail brand and corporate reputation; you must monitor suppliers to avoid such risks. On the other hand, some issues aren’t worth addressing. For example, you might accept a 10% price deviation in expense reporting because the overall financial risk is minimal, employees are happy, and policing expense reports would cost more than it would recover.
Social media introduces yet another area for risk management. How do you balance the desire for transparent communications with the potential for negative customer sentiments going viral? You need a flexible, ongoing risk management process that lets you redefine and prioritize risk as conditions change.
Forewarned is Forearmed: Avoiding Risk Up Front
The best risk-management position: avoid risk in the first place rather than addressing it after the fact. Predictive analytics apply pattern recognition, statistical analysis, and other mathematical techniques to large quantities of real-time data, identifying patterns, correlations, anomalies, and trends that highlight potential scenarios or tendencies. For example, banks use predictive analysis to identify behaviors marking customers most likely to leave – then send targeted offers designed to strengthen loyalty. Utilities or telecommunications providers use predictive analytics to forecast system loads, reducing the likelihood of service interruptions.
But explosive growth of sales, marketing, social media, and call center data can be overwhelming. The solution: In-memory computing lets you analyze risk at high speed for less cost, using big data from SAP HANA financials or SAP EPM solutions. SAP HANA provides instant insight into risks, even with the largest volumes of data, delivering:
• Breadth. Analyze big data from multiple sources.
• Depth. Ask complex questions about granular data.
• Speed. Receive fast, interactive responses.
• Simplicity. Eliminate the need for data preparation.
• Real time. Run real-time queries on real-time data.
No more waiting for results: You get immediate answers to any risk-related question – even with big data. You can answer complex interactive questions by drilling down to granular data, then run risk scenarios and get answers in seconds.
Fraud Management at Every Stage
One of the most dangerous categories of risk is fraud. It can take many forms, including false expense reporting, kickbacks, phantom vendors and fictitious payments, and identify theft. And every company is a potential victim. What’s the best way to mitigate fraud in your organization? Start by asking how well you can:
• Identify fraud before a damage occurs
• Investigate fraud rapidly and efficiently
• Keep track of evolving fraud behaviors
• Reduce unclear signals and false positives
• Automate fraud detection and predict the likelihood of fraud
• Check all transactions for fraud with minimal business impact
Managing fraud with SAP combines predictive analytics with the power of SAP HANA to help organizations identify fraud and avoid financial damages related to illegitimate activities. A combination of rules, methodologies, and predictive analytics help prevent much fraud in the first place. Powerful rule-based evaluations use high-speed mass detection to detect anomalies at any point in the transaction cycle, in real time. And fully integrated investigation capabilities make sure any problems are addressed immediately.
The most successful organizations have a comprehensive risk management process, using predictive analytics and high-speed in-memory computing to identify, monitor, and manage risk. Analytics Services from SAP can help you develop a comprehensive strategy that balances risk and reward. For more information on how predictive analytics and SAP HANA can help unlock the value of risk management while lowering fraud risk and exposure, visit us online