Risk Atmosphere is an innovative big data technology and management system providing centralized prevention of various operational risks, including personnel mistakes and fraud, with high accuracy. It has allowed to reduce operational losses by 49,5% 1
The problem needed to be solved: operational risks, caused by employees actions and leading to losses They can be divided into groups: Unintentional personnel actions (made while fulfilling staff duties): 1. 2. Intentional personnel actions (fraud): 2 cash miscalculations mistakes in bank details and parameters of transactions contravention of the rules of providing services stealing money from the cash desk fulfilling transactions from the customer accounts without their notion credit cards emission for non-existing customers
The scale of the problem in Sberbank retail network in the period of 2015-2016: >30K incidents of operational risk caused by the employee mistakes 3 ~3K >4K of the affected customers cases of fraud, including 6 incidents with the losses > 1M euro each almost 100M euro of bank total losses
The problems had to be solved As was As is Analysis of the past incidents Work with consequences Internal investigations only after the audit check and customer appeals Risks prediction and prevention Identification and elimination of core problems Continuous monitoring of all the activities in accordance with risk metrics 4 Difficulties with damage recovery. Losses of customer loyalty No damage nothing to compensate!
Why Risk Atmosphere is completely innovative? It is the first example of predictive models application in the field of operational risks, as traditionally such models have been applied only for credit risk management within the scoring of loaners 5 It uses big data analysis for search of statistical and causal relationships The model possesses high predicting power (gini index > 60%)
The basic elements of Risk Atmosphere Management System: Scoring model Analytical 1 25 basic metrics, which exert main influence on operational risk level. The list of risk factors and their weights are revised twice a year Data of different categories: Informational 2 Employees: socio-demographic metrics, the debt load, performance results, behavioral characteristics, the presence of suspicious activities within the discharge of duties Branch internal environment the history of incidents emergence, technical faults / equipment malfunctions, client claims, customer flow, etc. Branch external environment branch remoteness, type of settlement, life level, criminogenic situation in the region, etc. 6 Custom 3 Matrix of authorization and responsibilities Management tools
Operational losses management cycle how risk atmosphere management system works Results analysis Feedback analysis Analysis of high risk branches identification quality Adjustment of the model Systemic approach Revealing and eliminating of systemic problems: adjustment of labour processes / staff workflow technologies 5 6 1 3 2 Data collecting centralized data collection from Bank automatic systems data processing and standardization data verification and analysis Branch rating Applying scoring model to calculate branches rating identification of high-risk branches 7 Incident prevention Work with personnel: training / disciplinary measures 4 Tasks for field managers Via Smart Management System (the main tool for revealing gaps and eliminating deviations at work) for checking high-risk branches
Risk Atmosphere: what benefits it gives to top managers? Regions / branches / managers rating Priority control zones revealing Detection of problem areas in operational workflow, that may influence on operational risks level 8 During 2016 the following problems have been revealed in Sberbank operational processes: cash operations work organization personnel debt burden level customer personal data protection branch security provision information security provision
Risk Atmosphere: what benefits it gives to field managers? Risk Atmosphere predicts operational risks and answers the questions: Who? Where? When? What probability? Key risk indicators Branch passport Check-list 9 help to reveal branch problem areas displays the present situation at each branch in detail (operational indicators, personnel info) designed to fix the results of branch checkup (the preventive measures taken, staffing decisions made) The total info on each branch is generated automatically
Risk Atmosphere implementation results The amount of operational risk incidents decreased by -32% The operational losses decreased by -49,5% 2015 2016 2015 2016 Operational risk level High-risk branches All branches March 2016 Analysis period Branch rating and generating tasks for field managers -70% Taking measures for reducing risks February 2017 due to: early detection of branches with high level of potential risks measures held in advance, which allowed to reduce operational risks by 70% 10
Risk Atmosphere application cases BASED on real events Hanty-Mansi autonomous region, summer 2016 Orenburg city, autumn 2016 Moscow city, winter 2016-2017 11 2 branch employees (customer adviser and sales manager) within half a year stole 60000 euro from the personal accounts of retired and dead customers, by misappropriation of customers money and transferring it on their own bank cards / third parties bank cards. Accepted measures: the guilty staff was fired, the criminal investigation has been started On employee made a cash miscalculation of 600 euro. Their current debt load did not allow to repay the loan and to compensate the damage concurrently. Accepted measures: in order to prevent the further fraud actions, the employee was moved from operating cash to another area of work in the branch. At the same time our bank provided the employee an ample financial support to avoid the loan overduing Branch manager, in order to repay the monthly credit payment, misappropriated 200 euro from the operating cash in the day of payment and formalized it as a cash shortage. Accepted measures: the guilty employee was fired, misappropriated money were returned