In a recent report by Acuminor, the company outlined how competent authorities enhance their risk assessment activities.
How can Competent Authorities upgrade their risk assessment strategies? Although there’s been a shift towards a risk-based approach, the EBA has highlighted distinct variations and inconsistencies in their methods.
Major cases may have prompted a shift in supervisory direction, yet numerous challenges persist in four critical domains that affect both sectoral and individual financial institution risk evaluations:
- Implementing well-defined risk assessment methodologies that rely on credible sources and current data,
- Ensuring comprehensive risk assessment, covering all risk types, categories, and indicators,
- Prioritising entity-level risk assessments before diving into sectoral risk evaluations, and
- Amplifying the understanding and appreciation of entity-level risk assessments.
Enter Acuminor. With its financial crime intelligence aggregated from numerous verified sources, machine learning structures this intelligence into a vast threat and risk indicator database. Their platforms empower CAs to pinpoint risks beyond just money laundering, like terrorist financing and proliferation financing – areas often overlooked.
The value of Acuminor’s expertise is evident. It instills confidence in executing sectoral risk assessments with a versatile, documented strategy, ensuring CAs get reliable outcomes. This leads to more potent risk-focused supervisory strategies, negating typical issues like resource mismanagement.
Key Risk Assessment Enhancement Areas
- Methodology and Data: Risk assessment methodologies should be transparent, updated regularly, incorporate both quantitative and qualitative approaches, and anticipate new threats.
- Risk Assessment Scope: CAs must broaden their risk evaluations to cover all potential risk facets. It’s essential to look beyond just foreign threats and encompass domestic risks as well.
- Sectoral Risk Assessment Completion and Delivery: For meaningful sectoral risk assessments, CAs need a holistic perspective, informed by completed entity-level evaluations. It might necessitate increased resources or more efficient deployment.
- Training and Awareness: Understanding the reason behind risk assessments is crucial. Enhanced awareness will not only allow for better resource allocation but also pinpoint emerging threats.
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