Vendor Management for Financial Institutions: Banks, Credit Unions, Mortgage Companies
Next week, I'm speaking in Boston on April 18th and 19th, at the Risk Management Association's Governance, Compliance and Operational Risk Conference. I'm speaking on a topic that is very familiar to me but may be a tad bit controversial for the typical Risk Management Professional. The Topic: How Collaborative Compliance Overcomes the Limitations of Artificial Intelligence.
Artificial Intelligence has been over-hyped to the point where it is thought of as a cure-all. In fact, some claim computerized superhuman intelligence is just around the corner. So powerful, that AI-powered computers and robots will take all of our jobs! This is simply not the case. Ai has a LOT of limitations. It is powerful but in a very specific set of applications.
Artificial Intelligence works well when both the data being analyzed and the analysis rules are static. OCR, Gaming, Diagnosis and Speech Recognition are all good examples of AI working at scale. AI is a way to super scale LINEAR problems. However, Operational Risk Management and Regulatory Compliance are fields wrought with redundant manual processes that chase and verify rapidly changing data. They are EXPONENTIAL problems.
In my talk next week, “Compliance in an Exponential World: The Role of Artificial Intelligence and Curated Crowdsourcing in the Future of Compliance,” I will explore the use cases and limitations of Artificial Intelligence for managing risk and compliance and compare it to Trust Exchange’s unique Collaborative Compliance solution.
If you're attending, drop me a line here: http://www.trustexchange.com/GCOR
Using Operational Risk Management Framework for Vendor Monitoring.
Banks are missing a big piece of Vendor Monitoring
What is the difference between regtech and fintech? Regtech is a much broader term that applies to many more industries beyond banking.
The state of B2B credit today can be compared to the cargo cults of the post World War II pacific islanders. Like these cults, the large credit bureaus and financial institutions are trying to predict the future by recreating the circumstances of the past and forcing modern businesses to perform their sad obsolete rituals.
The John Frum Cult, located on the South Pacific island of Vanuatu, is a modern remnant of the “Cargo Cult” phenomenon. These cults sprung up when technologically advanced western cultures exposed themselves to the native islanders. The natives, upon seeing the inexplicable technology and vast amounts of supplies brought in by the militaries of the United States and Japan, attributed these achievements to magic or divine origin.
Once the war ended and the militaries withdrew, the natives began creating rituals that mimicked the behavior of the occupying militaries. They would stage parades, build runways, coconut radios and even airplanes made from palm trees in an attempt to conjure up the fantastic amounts of men, supplies and the miracle of flight. Sadly for them, short of another war, nothing they do will replicate the unique set of circumstances they witnessed in the 1940’s. Even today, the John Frum Cult (“Hello, I’m John from America”) has a ceremony every year on February 15th to celebrate their new god in the hope of his return.
Unfortunately, the business credit industry is enacting similarly obsolete rituals. Here are a few examples.
Check Credit. It costs a lot to check a company’s credit and in most cases the data isn’t accurate, timely or correlated with any company’s long term viability or ability to pay. This is especially true for small and medium businesses. Furthermore, business failure is a process and not an event. In order to understand the true risk of entering into a business relationship you need to monitor viability vs. check credit.
Reporting Credit. It costs a lot of money to report on a company, good or bad. The quality of a report is dependent on collecting ALL of the data on a particular company. These fees are a negative incentive to participation and reduce the quality of the overall data.
Data Integration. It costs a FORTUNE to integrate real time with the large business credit bureaus. This is an additional blockage to free data and skews the existing data toward the outcomes of the larger integrations: telecom, utilities, etc.
Trust. The large credit bureaus don't trust you to update your own information. They also don't track key information beyond the payment information such as certifications. (SOC1, SOC3, ISO, etc.)
At Trust Exchange, we are trying to stamp out the cult by making the data open, free and peer generated. With our service, you can create your own standards, rate companies and monitor all of your key business relationships.
Learn more by contacting us HERE
This afternoon we are co-hosting a webinar with our partner, Auditlink entitled "Leveraging Latest Technologies to Lower Cost of Vendor Management." Unfortunately, due to limited space, we were unable to accommodate everyone interested in attended so we had to shut down registrations. We will post the slides and a recording of the webinar within the next few days.
In the meantime, here is a summary of the topics discussed:
- new regulations are increasing the costs of managing vendors for credit unions
- cost of compliance increase isn't incremental but exponential
- existing solutions are largely manual workflow management and don't scale
- Trust Exchange provides a solution based on crowdsourcing and collaboration
- Trust Exchange DEMO
- Q & A
Stay in the loop....don't miss the next webinar by clicking below.
Here is the first of a series of tutorial videos we will be releasing over the coming weeks. This video provides a general overview of our product and demonstrates how easy it is to build a dashboard and track companies.
It's never been easier to build a custom compliance dashboard.
To learn more contact us. HERE