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Perspectives

Predictive risk intelligence

A risk monitoring strategy

Predictive risk intelligence (PRi) provides you with advance notice of the threats to your company or industry that could affect the decisions you make for your organization.

Managing future risk with predictive intelligence & risk monitoring strategies

Boards, shareholders, regulators, customers, and business partners alike not only request transparency, but also demand that companies demonstrate the ability to execute on risk management decisions using established and emerging risk intelligence methods and technologies. By introducing the concept of predictive risk intelligence, Deloitte can help clients think proactively about how risk monitoring occurs throughout the management lifecycle.

This paper introduces the concept of PRi, defines three strategies of risk monitoring, and describes how implementing a PRi program can apply a forward-looking lens on upcoming risks, with information on potential losses and trends that could affect your organization.

By understanding how risk occurs, organizations can become better equipped in not only preventing it but handling it if it does occur. This can be divided into three categories:

  • Reactive risk monitoring—This is the initial monitoring mechanism where the organization tracks and reports loss events after they happen. Process plan and the ability to prevent recurrence of similar events in the future.
  • Integrated risk monitoring—The next stage of monitoring that utilizes passive and active risk, performance, compliance, and control indicators to objectively report on risk performance thresholds periodically, or in near real-time. Its primary emphasis is the timely report-out on risks given identified assessment criteria, the status of established benchmarks, and interpretation of risks deviating from performance standards such as organizational risk appetites.
  • Predictive risk monitoring—A technique that helps organizations discover potential risks and threats, including types of risk not covered by existing risk indicators.

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PRi technology’s role in managing risk

PRi can help solve complex challenges across industries by helping turn risk, controls, and performance information into preventative and actionable insights, preparing organizations for a refined understanding of future risks. This can be done by defining PRi scope, identifying precursors of risk events and data sources, developing static and self-learning predictive algorithms, and initiating PRi generation.

Applying technology across the PRi lifecycle generates faster, more reliable, risk information while creating a risk monitoring process that is modern, effective, and self-evolving. Technology plays a key role at each stage of PRi, such as data collection, data standardization and aggregation, predictive risk modeling/analysis, and automated remediation/reporting.

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Getting started with PRi

  • Start smart: Initiate a predictive risk program by identifying risks that have high impact, available performance data, low forecasting complexity, and insufficient current capability.
  • Scale fast: As the proof of concept matures, expand PRi use cases to other areas supporting the firm's maximum value proposition.
  • Execute effectively: Establish performance measures and review PRi monitoring outcomes to determine how to integrate PRi more fully into the current portfolio of risk management activities.

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