Are High-Security Checks Worth It?

by Tamas Kadar
Risk monitoring is often used interchangeably with risk management.
There are key differences, however, and understanding them will help your company develop a better business strategy. Let’s break it all down in detail.
Risk monitoring is a crucial step where companies measure and review the efficiency of their risk strategies. It is a key component of the larger risk management framework and often leads to the creation of key risk indicators (KRIs).
Keep in mind that, depending on the context, the risk monitoring definition tends to be expansive and can overlap with risk mitigation, risk management and other key processes.
While business risk monitoring happens at the end of the risk management process and as a result of it, it needs to be ongoing and reviewed often, to ensure that appropriate risk responses are actioned in a timely fashion.
The risk monitoring process can be overseen by the risk team but it’s also common for compliance teams, anti-fraud teams, or trust and safety teams to take that responsibility.
Simply put, risk monitoring allows companies to know the types of risks that affect their operations and bottom line, as well as which strategies best mitigate them.
More specifically, risk monitoring in an organization:
Risk management is a complete framework, and the monitoring part usually takes place once a strategy has been put in place. Once an organization has created an action plan to tackle risk, the team can then monitor its impact.
In general, the risk management process follows a handful of steps:
This is why the deployment of key risk indicators becomes tremendously valuable. These concrete numbers help you measure and monitor the success (or failure) of your risk strategy.
Risk monitoring may be the responsibility of the whole risk management team, or it may be delegated to specific job roles. However, because risk goes by different names within different departments, risk monitoring could very well be the responsibility of the payments team, content moderation team, or compliance team.
It is worth noting that risk and compliance are still an afterthought in a number of industries. A report compiled by Ropes & Gray states that 57% of senior-level executives rank risk and compliance as one of the top challenges they feel least prepared to address.
Meanwhile, 79% of organizations said that cyber risk counted as a top 5 concern for their organization.
Partner with SEON to minimize risk and reduce fraud rates in your business with ML, real time data enrichment and advanced APIs.
Book a Demo
Risk monitoring can be performed continually, regularly, or ad hoc. Its frequency may depend on the kind of monitoring your company must perform:
Every organization will have a level of tolerance to risk, as it is impossible to operate without any risk whatsoever. This level of tolerance may be defined by upper management and/or shareholders and other parties, but it is the necessary starting point for assessing the level of risk monitoring that is required for each organization.
Risk monitoring and risk management are never black-or-white. Instead, we can think about risk as a spectrum. Certain types of risks may be tolerated by the organization, for example in particular areas of activity. Others may be deemed as something to prevent at all costs. By extension, one may want to be more strict when monitoring the latter than the former.
Also, make sure to investigate the likelihood of risk changing in nature and intensity. You will want to take into account historical trends as well as the general landscape in your sector, today and in the future.
In general terms, less intensive risk monitoring is likely to lead to slower and less noticeable changes to risk strategy and mitigation. On the other hand, more intensive risk monitoring will bring about quicker results but also cause more disruption to operations. Make sure you take this into account when deciding on the ideal level to implement for your needs.
Risk monitoring takes time and effort. It requires continuous input from the relevant team to measure, assess and optimize risk strategies. Because monitoring risk manually can be a drain on resources, many companies find that third-party software solutions allow them to focus on the strategy rather than on developing technical tools.
For instance, a team whose purpose is to monitor transactions (for instance to avoid AML fines) may find it easier to deploy third-party transaction monitoring software rather than build the same tools in-house.
A clearly defined and communicated risk monitoring plan helps improve risk monitoring greatly, also providing transparency and continuity within the organization’s teams.
Risk monitoring is only possible if you have data about your risk strategy and challenges. The two risk monitoring methods used are to either continuously monitor risk in real-time or to review it regularly. Most companies combine both methods to ensure their risk strategies are effective.
From there, techniques that can be utilized include:
Depending on the type of project or company the risk concerns, there are a wide variety of other risk monitoring techniques, as well as risk monitoring tools and risk management software. For instance, risk from fraud and identity theft is addressed through fraud prevention software.
Risk management is a cornerstone of a company’s global strategy. Risk monitoring requires the same skills needed to get a holistic view of risk across multiple departments, including:
When it comes to must-have tools and features, they vary greatly depending on the risk factors but, clearly, an ability to record and log data is paramount.
Because risk is industry-specific, it’s hard to find an example that will cover all bases. But let’s look at an example of risk monitoring specific to the financial world: anti-money laundering.
Banks, neobanks, and other financial institutions have to ensure they don’t allow financial terrorism and money laundering. This is a regulatory requirement.
Now, this is what an AML risk management framework could look like:
Since a key part of AML risk monitoring involves reviewing transactions over a certain threshold, it would also be worth looking at the rates of transactions that resulted in declines, reviews, or were accepted.
You can then use any anomalies in these numbers to monitor your risk strategy and improve it over time.
SEON is first and foremost a fraud protection platform. However, its flexibility and modularity make it suitable for a number of risk management and monitoring practices, including:
And, finally, fraud prevention is where SEON really shines, allowing companies of all sizes to protect themselves against the risks caused by fraudsters, bad agents, and cybercriminals.
Rapidly reduce fraud rates in your business with SEON and real time data enrichment and advanced APIs.
Book a Demo
Monitoring risk involves having access to the right business data and a clear risk strategy in place. Most companies will rely on KRIs or Key Risk Indicators to monitor risk and measure the success of their risk strategies.
Not exactly. Risk monitoring refers to having a clear overview of the risk landscape in your sector and for your organization, while transaction monitoring is a more set-in-stone practice, where financial transactions are monitored in certain sectors, for AML reasons. However, you may have also heard of risk-based transaction monitoring, which is transaction monitoring informed by risk factors.
Sources
Showing all with `` tag
Click here
Tamás Kádár is the Chief Executive Officer and co-founder of SEON. His mission to create a fraud-free world began after he founded the CEE’s first crypto exchange in 2017 and found it under constant attack. The solution he built now reduces fraud for 5,000+ companies worldwide, including global leaders such as KLM, Avis, and Patreon. In his spare time, he’s devouring data visualizations and injuring himself while doing basic DIY around his London pad.
The top stories of the month delivered straight to your inbox