operational_decision_management_lustratus

These rule breakers can expose banks to huge losses

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

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 reached. 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...
View Full Document

This note was uploaded on 01/29/2014 for the course ACC 230 taught by Professor Xia during the Winter '13 term at Bloomsburg.

Ask a homework question - tutors are online