Cookies help us display personalized product recommendations and ensure you have great shopping experience.

By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
SmartData CollectiveSmartData Collective
  • Analytics
    AnalyticsShow More
    image fx (60)
    Data Analytics Driving the Modern E-commerce Warehouse
    13 Min Read
    big data analytics in transporation
    Turning Data Into Decisions: How Analytics Improves Transportation Strategy
    3 Min Read
    sales and data analytics
    How Data Analytics Improves Lead Management and Sales Results
    9 Min Read
    data analytics and truck accident claims
    How Data Analytics Reduces Truck Accidents and Speeds Up Claims
    7 Min Read
    predictive analytics for interior designers
    Interior Designers Boost Profits with Predictive Analytics
    8 Min Read
  • Big Data
  • BI
  • Exclusive
  • IT
  • Marketing
  • Software
Search
© 2008-25 SmartData Collective. All Rights Reserved.
Reading: Risk by risk – a decision-centric approach to risk management
Share
Notification
Font ResizerAa
SmartData CollectiveSmartData Collective
Font ResizerAa
Search
  • About
  • Help
  • Privacy
Follow US
© 2008-23 SmartData Collective. All Rights Reserved.
SmartData Collective > Big Data > Data Mining > Risk by risk – a decision-centric approach to risk management
Business IntelligenceData MiningExclusivePredictive Analytics

Risk by risk – a decision-centric approach to risk management

JamesTaylor
JamesTaylor
4 Min Read
SHARE

 

Risk management is an important topic for many organizations, especially those in financial services. Most of these organizations acquire risk one customer, one transaction at a time – this customer is not going to be able to pay (risk), this transaction is fraudulent (risk), this deal will not make money in the prevailing economic circumstances (risk). Many of these same organizations, however, have a portfolio focus in their risk management program – they use BI and reporting tools to summarize and assess their overall risk profile. They consider their total risk and invest their analytic dollars at this level. This is a mistake.

By considering risk only after the fact, these companies are substituting risk reporting for risk management. They are using analytics not to prevent risk or to make effective trade-offs, but to see how much risk they have acquired and what the consequences might be. By considering only their overall or total risk they are obscuring the impact of individual transactions – individual decisions…

More Read

SAS Vertical Strategy
From GPS to Genomes: “Big Data” Expanding Its Reach
Fundamentals of C++ Programming for Data Scientists
A Sustainability Storm is Brewing for BI
4 huge BI challenges facing CIOs and IT Leaders

 

Risk management is an important topic for many organizations, especially those in financial services. Most of these organizations acquire risk one customer, one transaction at a time – this customer is not going to be able to pay (risk), this transaction is fraudulent (risk), this deal will not make money in the prevailing economic circumstances (risk). Many of these same organizations, however, have a portfolio focus in their risk management program – they use BI and reporting tools to summarize and assess their overall risk profile. They consider their total risk and invest their analytic dollars at this level. This is a mistake.

By considering risk only after the fact, these companies are substituting risk reporting for risk management. They are using analytics not to prevent risk or to make effective trade-offs, but to see how much risk they have acquired and what the consequences might be. By considering only their overall or total risk they are obscuring the impact of individual transactions – individual decisions – on their overall risk profile.

Instead companies need to identify all the decisions involved in their business that contribute to risks. When I work with clients I call this Decision Discovery and focus on the high-volume, transactional decisions that drive day-to-day operations. Many of these operational decisions involve some assessment of risk – or at least they should. Identifying these decisions and analyzing them allows a company to see all the places where risk enters the system.

This more decision-centric thinking positions a company for controlling and managing risk as it is acquired. Predictive analytic techniques can be used to score each decision for risk – how risky is it to offer this customer this line of credit, how risky is this trade or deal, how likely is this transaction to be fraudulent and so on. Combining this kind of predictive model – focused on estimating the likely future risk of an individual transaction or customer – with optimization technologies to be used to manage tradeoffs and business rules technology to manage actions and compliance allows risk-aware automation of these decisions. Now the systems and processes that support day to day operations are managing risk before it is acquired, not just reporting on it after the fact.

For more on this check out some of my posts like this one on the value of treating operational decision making as a corporate asset, this one on using decision management to manage risk and this one on how decision-centric organizations focus on decisions.

TAGGED:business rulesdecision managementdecisioning technologyoperational decisionsoptimizationpredictive analyticsRiskrisk management
Share This Article
Facebook Pinterest LinkedIn
Share

Follow us on Facebook

Latest News

Why the AI Race Is Being Decided at the Dataset Level
Why the AI Race Is Being Decided at the Dataset Level
Artificial Intelligence Big Data Exclusive
image fx (60)
Data Analytics Driving the Modern E-commerce Warehouse
Analytics Big Data Exclusive
ai for building crypto banks
Building Your Own Crypto Bank with AI
Blockchain Exclusive
julia taubitz vn5s g5spky unsplash
Benefits of AI in Nursing Education Amid Medicaid Cuts
Artificial Intelligence Exclusive News

Stay Connected

1.2kFollowersLike
33.7kFollowersFollow
222FollowersPin

You Might also Like

Some Thoughts on Pushing BI Beyond Business Managers

3 Min Read
predictive analytics for emails
AnalyticsExclusivePredictive Analytics

Can Predictive Analytics Methods Make Innovation More Successful?

6 Min Read

Out of the Recession

5 Min Read
big data scientists build bridges
AnalyticsPredictive Analytics

Big Data Scientists Are Bridge Builders

4 Min Read

SmartData Collective is one of the largest & trusted community covering technical content about Big Data, BI, Cloud, Analytics, Artificial Intelligence, IoT & more.

giveaway chatbots
How To Get An Award Winning Giveaway Bot
Big Data Chatbots Exclusive
ai in ecommerce
Artificial Intelligence for eCommerce: A Closer Look
Artificial Intelligence

Quick Link

  • About
  • Contact
  • Privacy
Follow US
© 2008-25 SmartData Collective. All Rights Reserved.
Go to mobile version
Welcome Back!

Sign in to your account

Username or Email Address
Password

Lost your password?