Shedding light on the rapid evolution of risk management and driving the move toward an advanced analytics approach
Dubai, United Arab Emirates: Qarar, a leading regional decision analytics company, has released its ‘Risk Priorities for 2020’ survey results as part of ‘The Qarar Market Pulse Series’, a collection of market survey reports that measure and report on matters ranging from analytics and regulation, to competition and risk management. Driving the move toward an advanced analytics approach, the new report is designed to help companies prepare for 2020 by keeping them abreast of rapidly shifting risk management priorities, policies and techniques, based on survey data collected from financial service professionals across the Middle East.
Zaid Kamhawi, CEO of Qarar, commented: “Risk management has changed dramatically over the years and in anticipation of further disruption as we approach 2020, organisations need to rethink their business models, adopt new practices, and expand their portfolios by creating new ways of serving customers through advanced risk analytics and decisioning. In this context, risk management must be taken in a strategic and tactical direction with a value-focused approach, shifting decisively from risk-averse to risk-aware. We have produced this first report to help organisations navigate the new risk management landscape and take pre-emptive measures, allowing them to not only avoid being disrupted, but also become the disrupters in their industries.”
During the survey, over 66% of respondents identified improving customer experience, increasing market share and improving operational efficiency as the top three most important business priorities to align with by 2020. These are typical characteristics of a maturing financial market where organisations are starting to realise that competitive products are becoming commoditised, switching costs are quickly reducing, and customer longevity is becoming increasingly important. These trends endorse an analytically-driven approach where decisions are based on empirical predictive models and proven experience.
In line with the high priority on improving operational efficiency and customer service, 60% of respondents selected cross-selling new products (63%) and customer service (59%) as the most likely core risk management processes to be digitised or automated by 2020. This indicates that banks will increasingly focus on building market share, another of their top priorities for 2020, from existing relationships rather than new ones.
Given the impending automation of processes, just less than three quarters of respondents indicated their interest in implementing machine learning across areas including customer risk management (44%), operational risk management (37%) and fraud identification (33%). This is a promising sign that organisations are beginning to understand the value of the data they hold and the insights that can be extracted from it, which will support the move toward a data-driven advanced analytics approach and require companies to invest in skilled resources, machine learning tools and data warehousing.
The report also confirmed that while respondents still rely heavily on credit bureau data (74%) and government data (52%) for risk-based decisions, they also have a growing appetite for social media data, with 11% of them placing it high on their priority list for 2020. This reflects the increasingly digital bank lending environment that is growing to cater to the region’s very large and youthful population. In this context, social media data can be used to support credit decisions, particularly for younger customers with limited or no credit bureau, and in time will also serve to open up new market opportunities.
Most organisations agree that advanced analytics will be a key component to future business success, but only 37% of respondents believed that they had the necessary in-house expertise to enable this progress. This had led to an increase in demand for outsourcing services, with 30% of respondents indicating that they would outsource due to a lack of internal expertise.
Credit risk analytics is an important ingredient to success in consumer finance today; however, the report shows that many organisations face challenged in getting their strategy right when it comes to the implementation of risk analytics services. Respondents identified the top three challenges as finding the right people for the job (59%), enterprise-wide analytics integration (52%) and applying new software and system solutions (44%).
Qarar’s ‘Risk Priorities for 2020’ report is the result of a survey conducted between 1st September and 30th October 2017 among 30 financial services professionals in the Middle East. 90% of the respondents were credit and risk professionals, with 50% based in Saudi Arabia, 22% in the United Arab Emirates, 7% in Kuwait, and the remainder from other GCC countries including Jordan, Lebanon and Bahrain.
Qarar is the region’s leading Decision Analytics Company specialised in offering consulting, decision analytics and software technology to deliver tailor-made customer management and process automation solutions. Headquartered in Dubai and serving customers across the Middle East and North Africa, Qarar helps its clients to solve business challenges and achieve sustainable business outcomes. We achieve this across the customer lifecycle by employing the right mix of predictive analytics, and market experience based advisory and decision technologies. Our expertise spans Strategy, Pricing, Credit Risk Management, Marketing and Sales Analytics.