Unlocking the Power of Metrics
10/16/2024
As financial institutions grapple with increasing complexity, especially around technology and risk, the use of metrics has become indispensable for effective decision-making. In a recent RMA Journal article, industry experts shared practical insights on how banks can leverage metrics to enhance risk management.
Collaboration is key. Developing effective metrics requires collaboration across departments. Kenneth Robbins, executive director of production operations and engineering at Ally Financial, emphasized the importance of aligning metrics with a common framework and involving all relevant teams. This ensures that the metrics are meaningful and support the organization’s broader goals.
Start simple, then scale. Stuart J. Strepman, managing director of enterprise and operational risk management at Charles Schwab, advised starting with simple metrics before moving on to more complex ones. By back-testing metrics and focusing on the essentials, banks can avoid the pitfalls of overanalyzing data or relying on false positives. Using historical data as a benchmark can also help in refining metrics over time.
Align metrics with strategic goals. Metrics should directly tie into your bank’s strategic objectives, according to Chad Marshall, Discover Financial’s senior manager of information risk management. Applying the SMART framework—Specific, Measurable, Actionable, Relevant, and Time-bound—can help ensure that your metrics are not only comprehensive but also actionable.
Embrace technology—but stay vigilant. As AI and other technologies rapidly evolve, they offer both opportunities and risks. AI can automate the development of key performance and risk indicators, making them more responsive to changes in the tech landscape. However, it also presents new security challenges, as adversaries may use AI to attack. Staying ahead requires continuous adaptation and leveraging these tools for defense.
Focus on what matters. With the flood of data generated by new technologies, it’s easy to lose sight of what’s important. Experts suggest focusing on cloud concentration risks and the impact of AI on service continuity. Keeping metrics aligned with your bank’s risk appetite statement ensures they remain relevant and useful.
