By Sanday Chong Kabange, The Red Flag Group®
The fact that we can predict opportunities in business, we may as well predict compliance and integrity risks. Traditionally, risk management has focused on mitigation and remediation - what might happen, what happened and what to do to prevent it from reoccurring.
This approach was acceptable and somewhat a standard some 15 years ago. Today, we are in an era where we can predict potential risks even before they happen. Thanks to predictive analytics which uses a combination to data mining, machine learning, artificial intelligence and cognitive analysis to predict future happenings. Moreover, we are aware of the trends, behaviour and patterns of some of our stakeholders. This should help us determine and predict where potential risks may reside.
Predictive analytics is currently used in various industries including but not limited to banking, finance, insurance, aviation, healthcare, travel, telecommunication, human resource, marketing and social networking. For instance, in finance and banking, predictive analytics is used to predict bad debtors by simply using a set credit worthiness scores before a loan is granted. In healthcare, it’s the same! predictive analytics can predict possible complications from certain medical procedures even before undertaking such procedures.
In compliance, predictive analytics can now be used to predict compliance and integrity risks before they occur. We do not need to wait for something to happen then work backwards trying to determine what happened then remediate. We can simply predict potential risks and prevent them immediately without waiting for them to happen. For example, we can use historical and current behavioral patterns of a target to predict whether that target may engage in illicit practices like corruption, bribery or fraud, then deploy remedial measures in real time.
We can use predictive analytics in compliance to predict potentially risky markets, risky suppliers, risky channel partners, risky industries or even risky transactions or dealings. Additionally, we can use predicative analytics to automate supplier and channel partner-approval processes and provide recommendations using some predefined risk algorithms. The value of knowing potential risks before they happen will help you save financial and human resources by ensuring that you do not engage in risky conduct that may attract heavy fines from regulators or damage your reputation. Early risk detection can also provide you a sense of security knowing that potential risks are remediated before impact.
Global business intelligence and technology firm, The Red Flag Group® is pioneering the use of predictive analytics to predict compliance and integrity risks to help businesses of different sizes around the world to make better decisions in selecting their key stakeholders.
The firm recently launched the seventh generation of its due diligence reports, referred to as Business Intelligence reports or IntegraCheck® 7.0, which integrates the use of predictive analytics to predict risks and provide recommendations on steps that can be taken by its clients.
The Red Flag Group® utilises 13 years of its due diligence experience, historical and current datasets as well as country and industry trends to predict risks using predefined algorithms and a proprietary risk scoring system known as IntegraRating®. The firm is also using predicative analytics to assess and determine compliance and integrity risks that are predominate in suppliers through a platform known as Supplier Integrity®. The state-of-the-art technology embedded in IntegraRating® and Supplier Integrity® is helping clients how to identify, assesses, remediate and mitigate risks beyond traditional means. Risk prediction was almost impossible several years ago, but this is now possible, thanks to platforms like Supplier Integrity® that are readily available in the market.
IntegraCheck® 7.0 due diligence reports also include Peer Benchmarking, a futuristic interactive radar chart to display how entities in the same industry and country measure when compared with peers. This is to help clients determine which business or channel partners are likely to expose them to risks and which ones may potentially not.