Back in 2017 JP Morgan Chase CEO, Jamie Dimon, caused quite a stir when he lamented the enormous amount of excess capital banks had to maintain to cover operational risk - funds that are not “being utilised to support our economy,” as he wrote an his annual letter to investors.
Reading Dimon’s letter, Paul Ford felt sure he could help. A former Royal Military Academy Sandhurst graduate and Royal Engineer Ford had spent the last decade applying that process-driven logic to the world of financial services and consulting. And managing and mitigating operational risk was an issue crying out for that type of thinking.
Currently, the world’s top 30 banks (based on tier 1 capital) have to maintain over $400 billion in operational risk capital and global banks separately each employ some 50,000 controls on average across their business. The risks are both considerable and complicated. Globally banks have suffered over $560 billion in operational risk fines and losses since 2011 and those risks continue to grow as technology reshapes how we live and bank.
Ford was convinced his expertise and experience could help reduce the multitude of inefficiencies in the current system of monitoring, measuring and managing that risk. In doing so banks could reduce the amount of capital the need to set aside.
“We can solve this on a day-to-day basis through engineering and also achieve a noble goal to rebuild trust and to make banking safer,” says Ford. “That way capital can be employed in activities that are more useful to the sector.”
Ford’s solution is Acin, a FinTech specialising in risk and control data standards and analysis. At the heart of its operation is a new digital measurement framework for benchmarking risks and controls - an advanced control identification number - hence the name of the business.
By applying this benchmarking throughout a financial services organisation Acin can identify potential missing or new areas of risk as well as duplicated controls that occur because different parts of the business don’t communicate their own control strategies.
“The industry mantra is that more control is always better. No one wants to reduce controls unless they are sure they are duplicated,” says Ford.
Acin’s streamlined system of operational risk defence is designed to become smarter and more efficient the more institutions it interacts with – creating a network defence model to help banks become more secure, reduce redundant controls and free up more capital.
Now two years old, the company currently is working with 12 Tier 1 banks with its growth potential mirroring the demands of a new generation of banking clients. “In today’s society people are demanding far more transparency in how banks act and behave. We are a measurable element of this,” says Ford.
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