Behavior Science Drives Risk Management Technology

MBA (5/27/2008 ) Palaparty, Vijay
The intersection of behavioral science and risk management strengthens as the threat landscape diversifies. Risk management and compliance technology vendors translate behaviors when developing automated risk management products and services—also creating automted training opportunities for industry professionals to better recognize risk.
“The largest part of the development cycle is translating and writing rules and really looking at where the highest areas of risk exist,” said Todd Cooper, vice president and general manager of the Financial Intelligent Unit at Wolters Kluwer Financial Services, Waltham, Mass. “The process begins with legal teams looking at various compliance and risk requirements and then figuring out what a system requires to manage those risks. This is followed by a development cycle that creates a rules-based system that is interactive. One thing that is important is the ability to identify fraud in real-time to stop it.”

Earlier this year, Wolters Kluwer released Wiz Sentri: Anti-Fraud Platform with Internal Fraud Module through its line of PCi banking analytics. The technology enables financial institutions to identify and track fraudulent trends and behavior in real-time in mainframe, client/server and web applications.

“Wiz Sentri targets fraud where it most often starts—within the institution,” Cooper said. “With the ability to use analytics and reporting by combining real-time application monitoring, detection and data transformation, financial institutions can address the fraudulent activity problem.”

Cooper said fraud detection is recognition of a deviation from regular patterns of business activity within systems. “Regardless of the degree of deviation, fraud involves a deviation from normal activity within systems,” he said.

“While the market may be tough, the return on investment is big when it comes to risk management,” said Dennis Outlaw, senior consultant for mortgage fraud at Wolters Kluwer. “For every dollar spent on managing fraud, there is eight times the amount saved in potential fraud losses."

Wolters Kluwer also developed a simulated training program for anti-money laundering—Wiz Sentril AML Virtuoso. The electronic gaming format provides virtual money laundering schemes and forensic schemes to AML investigators. It engages trainees, requiring them to investigate simulated schemes they would likely encounter. The product is updated regularly with new scenarios as they emerge.

“Financial institutions face challenges retaining skilled and experienced AML investigators,” Cooper said. “Experience is the best teacher and a simulated experience accelerates proficiency.”

“Fraud prevention requires massive implementation,” Cooper said. “Quick implementation, the ability to detect fraud in real time and identification of areas of high risk and lower risk is very important.”