Traditional Banks’ Risks. Cure Your Business Processes

Our previous article describes how Business Rules Management Systems (BRMS) can enhance banks’ resilience and sustainability due to their interactivity and user-friendliness. 

But it is neither the last nor the least key risk indicator for banks which was marked by European Central Bank (ECB) representative’s Eurozone bank assessment report. Speaking about risk management in the banking industry, the problem of inefficient business process management and ineffective banking infrastructure can’t escape from our attention. 

Is inept operational management becoming a banking risk?

Let’s recall that ECB representatives named weak internal controls and inefficiency of management bodies in performing their main functions the crucial risky factors. In this connection, we can assume that the majority of banks do not manage internal business processes effective enough to prevent critical staff infrastructure failures

There’s no question that banking institutions need to change their approaches to managing business processes by investing in infrastructure improvement to comply with new challenges and conditions. The safest way to ensure the best process management is to enhance workflow management by investing in business process management software solutions (BPMS).

BPMS: sort out infrastructure failures and strengthen vertical connections

Business Process Management (BPM) is the term used to identify the discipline of operations management.  Its specific methods are used for discovery, analysis, modeling, improvement, and automation of business processes and procedures.  Any combination of methods used to manage a company’s business processes more efficiently falls under the BPM.  

If you define the problem correctly, you almost have the solution.

Steve JobsAmerican business magnate, industrial designer, investor, and media proprietor

BPMS proves its effectiveness when the real problem is defined.

Most recently BPM has influenced the development of AI solutions specific to the banking and financial industry. The importance of business process management for banks is clearly seen in Figure 1 which shows the increase of interest to the solution.

fig.1

Fig. 1. Global BPM market forecast

Source: Grand View Research, Inc.

Managing workflow is a structural part of business process management technology. Workflow management is aimed at a matter of managing the integration of resources and sequence of actions for achieving strategic goals. In turn, it implies management of functions’ interaction, synchronizing of the assignments periods, reducing delays in the transmission of the results, etc. 

BPM is very important for managers at all levels because they can use it to strengthen the control over what is going on in a particular department, and in the bank as a whole. Managers are able to plan, implement processes, interact within the framework of the company’s procedures and tasks thus executing their control functions, alert on the implementation and issuance of the statistical data on the effectiveness of operating procedures.

Let business process automation deal with banking risk management

Business process automation tools will enable the bank to computerize their business processes like lending loans, account opening, getting payment from the parties; and internal processes such as HR-related processes, loan request processes, etc. 

The banking industry should focus on the automation of business processes and look out for the BPM software tools to increase the capability of their organization and managing workflows. But automation is effective only when the core process is effective itself.

The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency

Bill GatesAmerican business magnate, software developer, investor, and philanthropist

Another area where many banks may begin their BPM journey is the area of internal risk management. Banking regulations, security threats, and the increase of international terrorism have changed the banking landscape and made transparency and complete auditability of all banking activities more important than ever before. 

The majority of banks understand the importance of security and traceability with regards to account transactions. Traceability and auditability have been a part of their systems for nearly a decade. However, a lot of banks have not thoroughly systematized and improved the their internal processes partially because of mergers and acquisitions which have produced complex IT architectures resulting in post-merger integration complications of IT systems. But in spite of all mentioned above challenges, it has become evident that these internal processes need to be improved with regards to security, auditability, and efficiency. 

Workflow automation and business process management systems represent an increasingly important asset that banking groups should be implementing to merge these additional activities into a single, manageable platform. Business process management solutions can help banks mitigate risks in the following areas of activity:

  • Access request form.
  • Case management for electronic fraud complaints.
  • Cash expense reporting process.
  • Change request form.
  • Staff onboarding and offboarding process with security review.
  • Cash request process.
  • Encryption key issuance procedures.
  • Mobile branch movement request.
  • New system user access process.
  • Offsite ATM deployment process.
  • POS change of parameters request process.

One more aspect of BPM is Business process automation software solutions which provide banks and financial institutions with the following opportunities:

  • Streamlining all mission-critical business processes.
  • Servings customers in a better and effective manner.
  • Improving client management processes.
  • Helping employees to accelerate the decision-making process.
  • Defining detailed processes with a complete view of the reporting, activities, and duties of responsible departments.
  • Managing the workflow for better interconnection of employees within the organization.
  • Reducing approval time up to 75% after the implementation of automated business process software tools.
  • Saving workflow resource time and improving the productivity of the staff.

Although these innovative changes can increase efficiencies for banks worldwide, it’s important to consider the systematic approach behind automation that allows the technology itself to function, exist and be fruitful throughout the whole business process management lifecycle.

The Conclusion

In the future, banks and financial institutions will go on looking for new ways for improving their processes. It’s important to understand both how automation happens and the way to connect it with the manual processes that still occur. 

Growing customer expectations, regulatory pressure, and new digital competitors has become significant challenges for the banking sector. BPM provides banks with means to increase efficiency, ensure regulatory compliance, and provides with better methods of gathering and reporting data. Improved business process management tools will play a crucial role in mitigating operational, legislative and regulatory risks.

In the following article the subject of our scrutiny is banking risks and the way IT-solutions can help manage them.

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