Breaking Data Silos: Navigating the complex works of Controls

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Are banks truly prepared to navigate the rapidly evolving regulatory landscape and the increasing complexity of the risk environment? Recent statistics show that regulatory non-compliance cost the banking industry over 4 billion dollars globally in 2024, not just in fines but also in reputational damage. Add to that the growing sophistication of cyber threats and the operational challenges of managing global operations, and it becomes clear: the need for robust controls assessment has never been more critical.

What are Controls Assessments?

Simply put, controls assessments are thorough checks to ensure a bank’s internal processes are working as they should to minimize risks and ensure compliance. Controls assessments are an essential part of a robust internal control system; this involves examining how well controls function in key areas such as operations, compliance, technology, and finance.

For example, in operations, assessments may focus on transaction processing, customer onboarding, and account reconciliations. In compliance, the focus may be on adherence to regulations related to money laundering, customer identification, and data privacy. Technology assessments may examine cybersecurity measures, data security protocols, and the effectiveness of IT infrastructure. Finally, financial assessments may evaluate how effectively the bank manages credit risk, market risk, and other operational financial risks.

Also Read: Revolutionizing AML Risk Assessment: A Data-Driven Approach

Why are they important?

Controls assessments are fundamental to effective risk management. They play a crucial role in identifying and mitigating operational, financial, and reputational risks. Meeting strict regulations is vital to avoid costly fines and damage to a bank’s reputation. Strong controls help protect a bank’s assets and ensure smooth operations by identifying and addressing potential threats. Well-functioning controls also streamline processes, saving time and money. Moreover, demonstrating strong internal controls builds trust with customers, investors, and regulators.

Current Industry Challenges for Banks in Controls Assessments

Controls assessment is inherently hierarchical, encompassing multiple interconnected layers that ensure thorough evaluation and effective issue resolution, resulting in banks facing numerous challenges in effectively implementing and maintaining them. These challenges include:

  • Manual Processes: Many banks still rely heavily on manual processes for controls testing, leading to inefficiencies such as lack of agility, poor case management due to a lack of streamlined workflows, human error, delayed insights and increased costs.
  • Data Silos: Data related to controls is often fragmented across different systems and formats (such as unstructured data) making it difficult to gain a holistic view of the control environment.
  • Regulatory Complexity: The ever-evolving regulatory landscape demands continuous monitoring and adaptation of controls, creating a significant burden on compliance teams. Additionally, repeated audits stretch internal resources thin, especially without automated workflows.
  • Resource Constraints: Limited resources and budget constraints can hinder the ability to effectively implement and maintain robust controls, often resulting in reactive rather than proactive risk assessments, missing opportunities for early mitigation.
  • Lack of Automation: Insufficient automation in controls testing and monitoring can lead to delays, increased risk, and a lack of real-time insights.
  • Global Complexity: Navigating and complying with a patchwork of regulations across jurisdictions, including ensuring data privacy and security compliance across borders, presents significant challenges.
  • Difficulty in Prioritization: Identifying and prioritizing the most critical controls for assessment can be challenging, especially in complex organizations.

Also Read: Redefining Real-Time Payments: Apexon’s Partnership with FedNow

Apexon’s Vision for a Data-Driven Controls Assessment Framework

At Apexon, we possess deep expertise in data analytics, AI, and risk management across financial services. We leverage these core capabilities to help clients address critical business challenges across various domains. Recognizing the evolving needs of the banking industry, we are developing a specialized framework for data-driven controls assessment. This framework will build upon our existing expertise with the key pillars of our developing framework including:

  • Data Integration and Centralization: a data integration layer that utilizes ETL processes and data pipelines to consolidate data from diverse sources, including operational logs, compliance systems, and external feeds. This centralized data repository will enable a unified view of risk and control data, fostering a holistic assessment.
  • AI-Powered Risk Identification and Prioritization: Leveraging AI/ML, our framework will analyze historical data to identify emerging risks through pattern recognition, trend analysis, and anomaly detection within operational metrics. By linking these identified risks to existing controls and automating control testing and evaluation, we optimize control frameworks and prioritize risk remediation.
  • Streamlined Workflow and Issues tracking: Robust workflow engine ensuring end-to-end traceability from risk identification to remediation and resolution.
  • Data-Driven Insights and Reporting: Our framework will provide interactive dashboards and reports that deliver key insights into risk profiles, control effectiveness, and compliance status. These insights will be tailored to the specific needs of different stakeholders, including Chief Risk Officers, compliance teams, and operational heads.
  • Continuous Improvement and Adaptability: We are committed to continuous improvement. Our framework incorporates feedback loops to refine risk models, update control frameworks based on new data and insights, and ensure ongoing alignment with the evolving regulatory landscape.

Also Read: Elevating BFSI Excellence with Apexon’s Innovative Salesforce Solutions

Effective controls assessments are not just a compliance requirement; they are essential for ensuring proper risk management, business continuity, protecting the institution’s reputation, and driving sustainable growth. While challenges persist, data-driven solutions offer a clear path forward by enhancing efficiency, breaking down silos, and providing actionable insights. By embracing automation and data-driven methodologies, banks can gain a competitive advantage by improving operational efficiency, reducing costs, and demonstrating a strong commitment to sound risk management practices.

As the industry evolves, embracing automation and data-driven methodologies will no longer be optional but essential. Now is the time for banks to innovate and transform controls assessment into a strategic advantage.

Also read: Common Challenges in Claims Management

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