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Unformatted text preview: ductive ways. Rules-based decisions in banking – Governance
A major area where the automated use of formalized business rules and events to control decisions can help is
that of managing risk. For instance, in the area of financial risk, a topical area in recent years is that of the rogue
trader. These rule-breakers can expose banks to huge losses through overly risky activities, but this can be
controlled by ensuring that some level of their decision-making as they make their trades is embodied in clear
and easily updatable business rules and events. These could set and police limits and help prevent the trader
from becoming unacceptably exposed.
A similar approach can be used to address such areas as liquidity and credit counter-party risk. The more
complicated the combination of data sources required to be correlated, the more beneficial an automated
decision-making solution will be. Take transactional, or short-term, liquidity risk; that is, the risk of the bank Page 13 being unable to meet its payment obligations when they fall due. Gathering internal liquidity positions from
branches and subsidiaries in weekly reports is just not going to be sufficient in today’s ultra-conservative
environment. Instead, near real-time assessments are what is needed, and this is exactly where automated
decisions based on rules and events can help. By consolidating and correlating all of the factors from each
branch that affect liquidity on an intra-day basis, decisions can be changed if acceptable limits are being
Financial crimes detection and avoidance is another area that is a perfect match, using formalized business
rules and events to control decisions. A lot of crimes detection is based around patterns of activity. Large
amounts of money being taken from one account and switched to another, and then another, might signal
money laundering or check kiting. A pattern of credit card activity that is out of the ordinary for the card holder
could be a sign that the card has been stolen. Obvi...
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This note was uploaded on 01/29/2014 for the course ACC 230 taught by Professor Xia during the Winter '13 term at Bloomsburg.
- Winter '13