Agile and Cost Effective Compliance: Going Beyond Business Rules with Decision Management
2 likes1,368 views
The document discusses the complexities and challenges of financial compliance, emphasizing the need for effective decision management systems to navigate regulations. It outlines the benefits of utilizing business rules and models to enhance transparency, agility, consistency, and effectiveness in compliance processes. Additionally, it presents decision modeling as a crucial framework to improve compliance by providing structured, traceable, and reusable decision-making practices.
![©2014 Decision Management Solutions 17
Business Rules Deliver Agility
public class Application {
private Customer customers[];
private Customer goldCustomers[];
...
public void checkOrder() {
for (int i = 0; i < numCustomers; i++) {
Customer aCustomer = customers[i];
if (aCustomer.checkIfGold()) {
numGoldCustomers++;
goldCustomers[numGoldCustomers] = aCustomer;
if (aCustomer.getCurrentOrder().getAmount() > 100000)
aCustomer.setSpecialDiscount (0.05);
}
}
}
If customer is GoldCustomer
and Home_Equity_Loan_Value is more than $100,000
then college_loan_discount = 0.5%
College Loan Discounts
Current Discount =
Eligibility
Gold Customer and
Home Equity Loan more than $100,000
%
Which would you
rather change?
Scale
Transparency
Consistency
Agility
Effectiveness](https://image.slidesharecdn.com/agileandcosteffectivecompliancegoingbeyondbusinessruleswithdecisionmanagement-150604183033-lva1-app6891/85/Agile-and-Cost-Effective-Compliance-Going-Beyond-Business-Rules-with-Decision-Management-17-320.jpg)
Agile and Cost Effective Compliance: Going Beyond Business Rules with Decision Management
- 1. Agile and Cost Effective Financial Compliance Going Beyond Business Rules with Decision Management JamesTaylor, CEO
- 2. ©2014 Decision Management Solutions 2 Your Presenters James Taylor CEO of Decision Management Solutions We help clients to improve their business by applying business rules and analytic technology to automate and improve decisions I have spent the 11 years championing Decision Management and developing Decision Management Systems Jan Purchase Director Lux Magi We enable investment banks to automate demanding financial compliance regulations, against challenging deadlines, through the application of business rules, business decision modelling and business decision management systems
- 3. Agenda Compliance Challenges in Compliance The Business Rules Advantage Decision Management The Essential Framework Worked Examples 3©2014 Decision Management Solutions
- 4. Aims of Compliance Capital Adequacy Basel II/III, Solvency II Reporting and Disclosure: FED 5G FED 5G, MCO, FATCA Capital Management Dodd-Frank, FED Eligibility Customer Protection MiFID ©2014 Lux Magi Ltd 4
- 5. 5 Basel II Dodd-Frank FED 5G Solvency II FATCA Basel III Capital Adequacy Capital Management Reporting and Disclosure Timeline ©2014 Lux Magi Ltd
- 6. Why is Compliance Demanding? Challenging Pre-requisites Data standardisation and quality Reference data alignment and consistency Cross Department Impact Short ‘Time to Market’ Many Intersecting Rules for Special Cases ©2014 Lux Magi Ltd 6
- 7. What Do Compliance Rules Share? Automation Is Required Application Throughput Frequency Need for Swift Remediation Very Exceptional Escalation for Manual Decisions Repeatable Subject to General and Specific Audit Temporality 7©2014 Lux Magi Ltd
- 8. Challenges in Compliance 5 Measuring Effectiveness Near Real Time Management of Faults Ability to Self Check Immediate Articulation of Issues Improvement OverTime Explicit Articulation and Management of Goals Continuous Monitoring and Improvement Meaningful Metrics How to define them How to associate them with the rules 8©2014 Lux Magi Ltd
- 9. Time to Market Many mandates have implementation times < 1 year Fast Resolution of Issues/Imposed Changes ‘Expedited’ change cycle often less than one day Risk/Cost of errors is high Requires aids to comprehension, impact analysis Many sources of externally imposed change All change needs to be strongly audited Closure controlled and logged Challenges in Compliance 4 Agility 9©2014 Lux Magi Ltd
- 10. Challenges in Compliance 3 Consistency Initiatives Often Impact Many Systems Need to ensure they all behave coherently Can’t implement policy changes in each Need a common approach at different points of complex business process Facilitating Inter-Departmental Integrity Instrument Data Sourcing for Multiple Feeds Platform Ubiquity and Reuse 10©2014 Lux Magi Ltd
- 11. Challenges in Compliance 2 Transparency Precision Convey meaning in business terms You cannot safely change what you don’t understand Standard representation to make sharing easier Traceability Which rules were used? Why where they selected? What authority justified them? Can the regulation be seen to have been followed? 11©2014 Lux Magi Ltd
- 12. Each Mandate Adds Complexity Few points of high complexity, just a sprawl Large number of information sources and variations Many hidden interdependencies between rules Vital to Impose Structure, Otherwise… Difficult to comprehend, change, assess impact Becomes an amorphous ‘bag of rules’ Loss of integrity and consistency: gaps, overlaps Business Rules Alone Can’t SupportThis We Need a Larger Organising Principle Challenges in Compliance 1 Scale 12©2014 Lux Magi Ltd
- 13. 13©2014 Decision Management Solutions Scale Transparency Consistency Agility Effectiveness
- 15. ©2014 Decision Management Solutions 15 Business Rules Drive Compliance But policies and regulations are hard to manage
- 16. ©2014 Decision Management Solutions 16 Business Rules Deliver Transparency Scale Transparency Consistency Agility Effectiveness
- 17. ©2014 Decision Management Solutions 17 Business Rules Deliver Agility public class Application { private Customer customers[]; private Customer goldCustomers[]; ... public void checkOrder() { for (int i = 0; i < numCustomers; i++) { Customer aCustomer = customers[i]; if (aCustomer.checkIfGold()) { numGoldCustomers++; goldCustomers[numGoldCustomers] = aCustomer; if (aCustomer.getCurrentOrder().getAmount() > 100000) aCustomer.setSpecialDiscount (0.05); } } } If customer is GoldCustomer and Home_Equity_Loan_Value is more than $100,000 then college_loan_discount = 0.5% College Loan Discounts Current Discount = Eligibility Gold Customer and Home Equity Loan more than $100,000 % Which would you rather change? Scale Transparency Consistency Agility Effectiveness
- 18. ©2014 Decision Management Solutions 18 Hard To Measure Effectiveness Rarely just one rule Many rules must be executed to deliver improvement Mapping rules to KPIs does not work Scale Transparency Consistency Agility Effectiveness
- 19. ©2014 Decision Management Solutions Hard To Scale 19 Scale Transparency Consistency Agility Effectiveness Lots of regulations Lots of policies Lots of rules No structure
- 20. Hard To Be Consistent Rules spread across processes and systems like Peanut Butter 20©2014 Decision Management Solutions Scale Transparency Consistency Agility Effectiveness
- 21. Decision Management The Essential Framework
- 22. ©2014 Decision Management Solutions Decision Management A business discipline and a technology stack That builds on existing IT infrastructure Enhancing business processes Increasing transparency and business control Leveraging analytics to manage uncertainty It is a proven framework for implementing business rules management systems 22
- 23. Business Processes ©2014 Decision Management Solutions 23 Decisions At The Center Analytics People KPIs Customers Systems Decision
- 24. ©2014 Decision Management Solutions 24 Put Decisions In Context Know which business processes will be improved by your rules Know when your rules will be needed to make a decision Know how you will have to deploy your rules to automate decisions Know who needs to be involved in elicitation and manage - and why Scale Transparency Consistency Agility Effectiveness
- 25. ©2014 Decision Management Solutions 25 Tie KPIs to Decisions KPIs impacted by decision Capital Adequacy Accuracy of Liquidity Profile Accuracy of Risk Reporting … … Is this instrument eligible for use as collateral * * What is the asset class of this instrument? * * What is the worst credit rating of this instrument? * * * … Scale Transparency Consistency Agility Effectiveness
- 26. ©2014 Decision Management Solutions 26 How To Describe Decisions Information • What is needed? • Where does it come from? Know-how • How to make it • How to improve it Precision • Exactly how? • Specificity without technical details
- 27. ©2014 Decision Management Solutions 27 Decisions Require Information “Determine Federal Reserve Eligibility” requires Currency Classification and Eligibility “ValidateTax Return” requires Return and Citizen information “Refer claim for fraud” requires Claim and Provider information
- 28. ©2014 Decision Management Solutions 28 Decisions Require Knowledge “Determine Federal Reserve Eligibility” requires Collateral Guidelines andVolatility “ValidateTax Return” requiresTax Regulations “Refer claim for fraud” requires likelihood of fraud
- 29. ©2014 Decision Management Solutions 29 Decompose Decisioning What is required to make decision? Information Guidelines, policy Expertise Regulations Predictive Analytic Models Data Mining Results The results of other decisions
- 30. ©2014 Decision Management Solutions 30 Decisions Require Decisions These decisions must be made first Scale up and down Scale Transparency Consistency Agility Effectiveness
- 31. ©2014 Decision Management Solutions 31 Decision Models Improve Compliance Transparency of Sources Consistent Rule Groups Scale and Reuse
- 32. ©2014 Decision Management Solutions Decision Models Deliver Traceability
- 33. ©2014 Decision Management Solutions Decisions Models: Agile Automation
- 34. Decision Modeling and Notation (DMN) “… provide a common notation that is readily understandable by all business users... DMN creates a standardized bridge for the gap between the business decision design and decision implementation.” Use Cases Modeling Human Decision-making Modeling Requirements for automated Decision-making Implementing automated Decision-making OMG Beta Specification Released Standard expected mid-2014 Decision Management Solutions, IBM, Oracle,TIBCO, FICO, Escape Velocity, KUL, Model Systems, KPI,Visumpoint ©2014 Decision Management Solutions
- 35. Walkthrough Decisions First Modeller Example FED Eligibility and Asset Classification Will Address All of the Issues We’ve Discussed 35©2014 Lux Magi Ltd
- 36. Walkthrough We’ve Seen How… Scale is Addressed by Providing Structure Transparency is Addressed by Linking to Sources Effectiveness Measurements are Built in Consistency Support by Process/Event/Decisions Agility Handled by impact assessment (shown) Deployment to BRMS (not shown) 36©2014 Lux Magi Ltd
- 37. Questions?
- 38. Recap and Next Steps
- 40. Decisions First Decisions first, rules second Make Decisions part of Business Architecture Adopt Decision Modeling 40©2014 Decision Management Solutions Scale Transparency Consistency Agility Effectiveness
- 41. DecisionsFirst Modeler Social, collaborative, cloud-based Decision Management modeling software that puts decisions at the heart of your business architecture, building better requirements and driving successful business rules implementations 41©2013 Decision Management Solutions decisionmanagementsolutions.com/decisionsfirst-modeler
- 42. Free Companion White Paper Download the companion white paper http://www.decisionmanageme ntsolutions.com/whitepaper/ rapid-and-cost-effective- financial-compliance/ 42©2014-15 Decision Management Solutions
- 43. Thank You JamesTaylor james@decisionmanagementsolutions.com Jan Purchase purchase@luxmagi.com More on Decision Management at decisionmangementsolutions.com luxmagi.com