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Leveraging Tech and AI to Gain an Edge in Operational Risk Mitigation
AI can help businesses detect global risk quickly, allowing them to act in time to mitigate damage to their organization and reputation.
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Relations with trade counterparties and vendors caused almost €550 billion and more than 67,000 business loss events between 2016 and 2021, according to the ORX Banking Annual Operational Risk Loss report. The most common event type for most business lines during this time period was “Execution, Delivery, & Process Management.”
In the face of such alarming realities, businesses need to act quickly to mitigate global risk. Doing nothing could have severe consequences — massive financial losses, a tarnished reputation, and increased regulatory scrutiny.
Additionally, the challenge intensifies when companies are already strapped for resources. It would take teams of people knowledgeable in a myriad of areas — from cybersecurity and technology, legalities, crisis management, and logistics — to monitor all potential risks a company faces on a daily basis.
Because employees can't juggle all risk possibilities, it's crucial for companies to have a game plan to spot, track, and assess risks in real time. Without one, they run the risk of operational disruptions and damage to both profits and reputation.
Getting the Full Picture of Operational Risk
Focusing on the immediate supply chain seems like the go-to move. But consider the full sweep of other possibilities. Operational risks can emerge from various sources, including third-party vendors, outsourcing partners, technology infrastructure, and even subcontractors at the fourth and fifth tiers.
These risks can be exacerbated by supply chain disruptions, cybersecurity or data breaches, compliance violations, theft of intellectual property, and price changes. Failure to monitor, acknowledge, and mitigate the risks beyond the supply chain leaves the organization vulnerable to disruptions.
Beyond the Basics: Third-, Fourth-, and Fifth-Party Risk Monitoring
Today’s interconnected business network means companies must include third, fourth, and even fifth parties in their monitoring plan.
“The biggest threats companies need to be aware of are the threats they don't see coming,” says Joshua Haecker, CEO and co-founder of Predata. “Whether it's an unknown labor law violation in the fourth tier of their supply chain, a trend of cyber incidents occurring to their peers, or a wave of regulatory fines impacting their vendors, any of these can have cascading business impacts that are huge if they aren't identified and proactively mitigated.”
An organization can quickly adjust to threats and ensure business continues as usual by monitoring risks. This commitment to high operational and ethical standards enhances its reputation and builds trust with stakeholders.
Monitoring Global Risk with the Right Technology
Risk management is more approachable with the right technology. FiscalNote Risk Connector is an artificial intelligence-based technology that provides businesses with comprehensive, continuous coverage so potential risks don’t go unnoticed.
Risk Connector gives companies a clear view of their relationship network, including suppliers, vendors, partners, and investors. It also offers real-time risk updates across these relationships, allowing companies to adapt their risk management strategies.
“Risk Connector is holistic and covers the full gamut of business-impacting risks,” Haecker says. “It scans millions of websites and media sites alongside structured corporate document repositories, such as SEC filings and court document stores. It uses NLP to identify entities and map their relationships with their connections, and then tracks the nature and tone of conversations about each company and its network.”
Risk Connector offers businesses comprehensive coverage, ranking all potential risks. This allows organizations to tackle threats head-on, well before they spiral out of control.
"Focusing on just today's risks leaves you in a mode of constantly putting out fires,” says Andy Chakraborty, director of financial products and data science for FiscalNote. “Trying to look at every possible risk is expensive and paralyzing. By looking at the risks of those with whom you do business and then using AI to prioritize those risks, our customers will be able to prioritize those critical few risks most likely to have material adverse consequences."
Businesses are already benefiting from Risk Connector. Among the first users was a Fortune 100 tech firm grappling with growing regulatory pressure to reduce privacy law violations and escalating security incidents.
“Leveraging Risk Connector’s comprehensive and auditable feed of entities and risk events, the company is able to benchmark itself against its own past performance, as well as that of its peers, conduct scenario generation to mitigate future risks, and identify emerging operational risk trends using a fully auditable trail of data,” Haecker says.
Risk Connector sets a new standard in risk management. With its ability to track a wide range of information at a rapid pace, analyzing billions of data points, it provides organizations with unparalleled insights into potential risks. By empowering organizations with actionable insights, Risk Connector enables informed decision-making and proactive threat mitigation, changing how risks are managed.
Ready to see for yourself?
FiscalNote Risk Connector provides an unmatched picture of risks to your organization and their potential consequences, with AI that tracks a greater breadth of information at a faster speed than any other tool available.