Financial Risk Management Trends and Software Solutions

Risk management is no longer a buzzword, if it ever was. Slowing economies, social upheavals across the globe, and an uptick in natural disasters highlight the need for corporations to make risk management an integral part of their business strategy, rather than leaving it as a policy footnote.

As business becomes increasingly networked and interdependent, companies also become more susceptible to being negatively impacted by forces outside their immediate markets and supply chains. Financial risk management, in particular, must be a chief concern of not only financial institutions, but of those who regulate them and those whose money is entrusted to them.

Increased regulation and changing legislation place further burdens on the financial industry to moderate risks. The enormous complexity of risk factors makes fintech risk management platforms absolutely essential. Enterprise-wide, real-time risk mitigation requires deeper integration and more powerful detection capabilities than legacy systems can provide.

In this article, we will look at some of the trends that are shaping the risk management software industry, and that are providing opportunities for fintech developers.

Real-Time Risk Management Software

The use of algorithmic or High Frequency Trading (HFT) underscores the need for trading institutions to implement continuous monitoring and controls. Along with microsecond trade executions comes the threat of millions of losses within the blink of an eye. While the “Flash Crash” of 2010 prompted regulators to require the addition of safety mechanisms on the market infrastructure, such measures do little to protect institutions from internal vulnerabilities such as flawed algorithms or fraud. Only by implementing real-time risk management software can institutions reduce risk as it materializes, rather than responding after the loss has occurred.

Even in traditional banking services there exists the need to identify and nullify fraud and other risks as they occur, rather than as a function of an audit. With the trend toward real-time payments, banks will be challenged more than ever to spot fraud before it happens. The use of enterprise risk management software for banks will help them analyze transactions in as they occur, rather than sorting through them the next day, as is often the case currently.

Even credit risk software provides opportunities for real-time analysis of risk factors. Not only can the risks be evaluated before credit decisions are made, but as an ongoing process to identify sudden changes in a borrower’s creditworthiness.

Many banks and trading institutions are realizing the benefits of using real-time risk management software. However, regulatory requirements will soon require institutions to mitigate risk to such a degree that such platforms will be required.

Enterprise-Wide Risk Management Software (ERM)

Enterprise-wide risk management represents a structured and methodical approach to identifying and responding to risks as it exists at every level of an organization, and across all operational processes. Enterprise risk management seeks to expose potential risk factors in reporting, business strategies, governance, financial operations, regulatory compliance, and virtually all other aspects of the organization.

Organizational complexity and the interdependency of factors requires powerful risk management and analytics software. The developer who can provide customized solutions will have a wealth of opportunities in this market for the foreseeable future.

Use of Big Data and Analytics

The trend toward utilization of big data for risk management will probably continue forever. The reason is that big data is the only technology with the power to expose hidden risks to the degree possible with big data. Of course, raw data, alone, is virtually useless. But coupled with powerful analytics engines, big data enables financial institutions to identify risk factors in such unlikely data sources as social media postings, news articles, and even weather forecasts.

In fact, big data opens a world of information to decision makers that was not was available before — information that can have a heavy bearing on the decisions they make.

Though big data is no longer new, the market is still wide open for developers who can provide innovative solutions that help companies reduce risks. And risk management software is not limited to detecting credit risk or fraud. An institution’s vulnerability to cyber threats, operational risks, and other non-financial forces also provides opportunity for innovation.

Machine Learning

Modern risk management requires more than analysis of past or current events; it requires anticipating events before they occur. The science of using historical patterns and current data in order to predict behaviors is known as predictive analysis. For this powerful technology to be effective, it must be able to do more than follow a set of instructions, it must be able to learn on its own — a technology known as machine learning.

While the complexity of machine learning applications is no small undertaking, the trend toward advanced predictive analysis for managing risks opens a lucrative market for developers who have the technology to make it work.

BYOD Risk Management

Business of all types seem to have succumbed to employees’ desire to bring their personal mobile devices to work. The trend poses particular risks for financial institutions because of the potential that customers’ private information can, one way or another, end up on an employee’s personal device.

The ramifications of this happening are huge, and the likelihood of it occurring is greater than you may think. With 43% of employees using their personal device to access work email, it is easy to see how sensitive information could be intentionally or unintentionally downloaded to a personal device.

The problem of unauthorized data being present on employees’ devices opens an opportunity for innovative developers. Many companies’ BYOD policies already provide for the company to inspect personal devices if used for company business. The opportunity exists, then, for companies who allow BYOD to require the installation of monitoring software that will prohibit a device from storing company data, or which will alert the company if it were to happen.

Development in this niche requires expertise in mobile app development, data security, and data analytics, but there is plenty of low-hanging fruit for developers who have the skillset.

How Ignite Can Help?

Today’s corporations face unprecedented risks, including threats that can interrupt business operations, market volatility, threats of cyber attacks, natural disasters, and changes in legislation and regulation that can affect business strategies. And none are more vulnerable than financial institutions.

But where there is a problem, there is also an opportunity for a solution. Risk management software provides effective solutions for companies of all sizes that acknowledge the need to manage the risks with which they are increasingly confronted.

Ignite is a world-class provider of technology solutions at a outsource prices. We are experts in all of the verticals needed for development in the complex field of risk management.

If custom development of risk management software is your objective, we invite you to consider us as your technology partner. Whether you need portfolio risk management software, enterprise-wide risk management solutions, or anything in between, we’ve got you covered.

We provide development solutions for organizations around the world over. May we add you to our list of satisfied clients?

We invite you to contact us today for a free consultation.

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