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Risk management and automation

13/06/2023 minute read Ben Franklin

Many businesses often focus heavily on increasing their revenue and expanding their operations, without paying enough attention to controlling and managing their risks. But this is gradually changing, as there is now a smaller margin for error, particularly when many stakeholders are involved. 

A proven solution for this challenge is to adopt new tools that offer a mixed blend of data science, machine learning, AI, and automation. Automated risk management can ultimately help employees to save time and reduce stress too.

The importance of a streamlined risk management process

Manual risk management often proves to be ineffective and can lead to significant harm in the event of an incident such as a breach. Instead of effectively controlling risks, teams may find themselves spending excessive amounts of time and money fighting fires and manually collecting data for reports.

Moreover, these reports, despite the time and effort invested, are often outdated by the time they are completed. And when teams operate within different organisational silos, they are more likely to conduct non-standard assessments, resulting in scattered data, and inadequate risk identification/mitigation.

Compliance becomes a complex challenge when risk management is handled manually too, as teams struggle to align framework requirements, mitigation controls, and corporate policies to safeguard their interests.

Automation in risk management is designed to support and enhance the work of finance teams rather than completely replacing their role. By automating certain financial processes, these teams can devote more time and attention to a detailed risk mitigation.

It also ensures data is well-organised and easily accessible. This eliminates the manual effort required when entering or storing data, enabling employees to prioritise core value-driven activities.

It’s important to note that fully automating the entire risk management process would require advanced artificial intelligence capabilities. This would involve AI systems that understand the nuances of the business environment/objectives, and have the ability to analyse both internal and external processes within the company.

The benefits of automated risk management

Technology is prioritised by many businesses today due to tougher regulatory requirements, rising costs, and an increased desire for transparency. They can leverage automation to monitor hazards swiftly, flexibly, and affordably. Here are some of the other benefits gained:

Enhanced efficiency

Automation brings forth a significant advantage in its capacity to streamline repetitive and time-consuming tasks. By harnessing the necessary tools, organisations can streamline processes such as data collection, analysis, and reporting.

This relieves the burden on finance teams, enabling them to dedicate their efforts towards more strategic endeavours. Consequently, this boosts efficiency and productivity, facilitating quicker risk response and empowering better-informed decision-making during crises.

Accurate and real time data

Manual processes are susceptible to human error, inconsistencies, and delays, which can compromise the accuracy and reliability of data. In contrast, automation mitigates these issues by ensuring data accuracy and consistency throughout the risk management process.

Through integration with diverse systems, risk management software seamlessly collects data from various sources and updates it in real time. This empowers managers with reliable and up-to-date information, facilitating effective assessment, continuous monitoring, and efficient strategies.

Elimination of manual tasks

In the digital age, companies grapple with vast volumes of data, making manual data management an overwhelming and unnecessary task. However, with today's technology, there are solutions available to alleviate this. Teams can improve their operations by eliminating the need for manual data entry.

Instead, with automation they can seamlessly upload and categorise information so teams can redirect their focus to more important tasks, making them more productive and maximising their effectiveness. It also facilitates scheduled recurring tasks, ensuring accurate and efficient execution.   

How automation can improve your risk management process

Improved risk identification and mitigation

Automation tools possess the capability to rapidly analyse large volumes of information, ensuring companies can comprehensively and swiftly identify risks. Through the utilisation of machine learning algorithms and AI, it’s possible to identify patterns, anomalies, and emerging threats that might have otherwise been overlooked.

As a result, organisations gain the ability to proactively address potential threats and capitalise on new opportunities, ensuring a forward-thinking and agile risk management approach.

Enhanced compliance

Ensuring compliance with regulatory requirements is of the utmost importance within this realm. Automation plays a vital role in the battle to stay ahead of compliance standards. By centralising data, tracking changes, and automatically generating audit trails, businesses can optimise their compliance process.

Through automated compliance monitoring, timely alerts, and comprehensive reporting, they can also steer clear of penalties and uphold a robust governance framework.

Improved internal communication

Finance leaders often encounter challenges when it comes to communicating and tracking tasks across multiple functions/departments. The task of staying organised becomes increasingly difficult when relying on a combination of emails, notes, and reminders.

However, when using the right tools, they can boost their workflows. This allows them to have a clear view of all work performed, while delegating tasks seamlessly and fostering effective communication within their respective teams.

Potential challenges when automating risk management

When a business decides to automate its risk management processes, there can be several hurdles they might encounter. However, with the right preparation and considerations, the following challenges can be addressed effectively:

1. Data quality and integration

One of the primary challenges is ensuring the availability of high-quality and integrated data. Businesses need to have clean, reliable, and standardised data from various sources to feed into the risk management process. This may require data cleansing, data governance, and integration efforts to ensure accurate risk assessments.

2. System integration and compatibility

Integrating risk management automation with existing systems, such as enterprise resource planning (ERP) or customer relationship management (CRM) platforms, can be complex. Businesses should evaluate the compatibility of the risk management solution with their existing IT infrastructure to ensure seamless integration and data flow.

3. Risk modelling and customisation

Every business has unique risk profiles and requirements. The risk management solution should allow for customisation and flexible risk modelling capabilities to align with the specific needs of the organisation. This may involve defining risk parameters, thresholds, and risk scoring methodologies.

4. Change management and training

Implementing automated risk management requires a change in processes and workflows. Employees need to be trained on the new system, its functionalities, and how to interpret the generated risk insights. Adequate change management efforts, including training programmes and communication, are essential for successful adoption.

5. Continuous monitoring and maintenance

Risk management is an ongoing process that requires continuous monitoring and maintenance. Businesses need to establish protocols for regular system updates, data validation, and ensuring the accuracy of risk assessments. Additionally, they should have mechanisms in place to promptly address any system issues or bugs.

Using Advanced Financials to automate your risk management

To maintain long-term financial health, businesses must have effective processes for managing and minimising their financial risk. However, in the modern digital age, many continue to use outdated technology and manual procedures which escalate their own risk factors. Automation would allow them to accomplish faster and more precise outcomes with less effort.

Our financial management software, Advanced Financials, assists finance teams with enhancing their operations. With functionality around the likes of accounts payable/receivable, sales invoicing, credit management, bank reconciliation, purchase management, cost management, asset management, and much more, it becomes a real possibility to integrate and automate cross-functional tasks.

Finance managers can quickly understand financial performance through built-in dashboards, and CFOs can seamlessly harness strategic insights thanks to a plethora of customisable reports, all of which lead to better risk management.