Front office control best practices

The need for 1st office controls is in the here and now. More and more financial institutions are being focused on effectively controlling non-financial risks in their frontline businesses. The importance of front office controls has moved beyond its teenage years and come into the light of maturity where operational risk failures of one kind or another have cost major banks some dollar 320 bn since the end of the financial crisis. Drivers of this increased attention include regulatory pressure for greater accountability, well-publicized conduct issues, and recognition that the front office activities required a detailed application of three lines of defense control principals across non-financial risk types.

With the evolution of front office controls, there is an observed trend towards 1st line accountability. Several surveys have led to results to that point of opinions which state that business function focusing on client risks such as KYC and client screening have moved or are moving from 2nd line to 1st line. Regulatory reporting and control assurance testing are also quite likely to be found in the 1st line of defense. Similarly, incident management is increasingly facing a shift from 2nd to the 1st line. The role of 1st line control monitoring in surveillance is active and increasing, given regulatory requirements and a shift of these requirements from the 2nsn lines. More than half the banks from the EY Survey (Feb 2017) say surveillance monitoring is requiring the highest level of effort from their team. The existing and future of 1st line monitoring and surveillance with mandate increased investment in data integrity, and bring into focus a specialized role of the CCO (chief control officer). However, the best of staffing cannot account for managing the huge amount of data created at touchpoints, especially false positives thrown up during surveillance. Thus, we are to expect a continued focus on enhancing technology solutions to support ongoing monitoring and “testing-reading” workflow – i.e. creating work trails that will make testing activities more efficient.

What’s next

The need to do more and more to provide reassurance both internally and externally that risk and control frameworks are robust arrives at a time of generational shift in the power of technology. What can be checked and monitored by machines is now infinitely greater than even five years ago. Data can be managed, trades can be monitored and personal behavior can be overseen with a degree of comprehensiveness that would boggle the mind of a compliance officer from 10 years ago.

We are only at the frontiers of what AI and machine learning can do in the field of front office controls. With Cognitive View, you can now manage control and compliance risks using next-generation AI, Machine Learning and Big Data Analysis. We equip businesses with automated Conduct Risk Analysis and Compliance Monitoring functions apart from Regulation Management Applications, which protects your organization from probable risks and compliance issues minus the hassles of manual data handling procedures.