29 Jul

Managing Risk with the Power of Prescriptive Analytics

By: Ed Barton, President G2 Web Services

– July 30, 2014 –

Over the last several years, in the fields of risk management and compliance, we have seen the rise of “big data”, data sets that are so enormous, they require special data management tools to process and analyze them.  The volume, velocity and variety of big data transmission are three key distinguishing factors that help set big data apart.  “Big data” is about the need and ability to manage and analyze vast quantities of data being collected at high velocity.  As of 2012, about 2.5 exabytes of data are created daily, a number that doubles approximately every 40 months (Harvard Business Review). That is enough data to fill 50 billion file cabinets of text…each day.

While not all of the data analyzed will provide significant value to the risk management professional, some of it – the proverbial “needles in the haystack” – provides key indicators of risk that prove exceptionally useful in assessing or mitigating risk.  Integrating the use of big data enables better identification of correlations, and allows users to analyze the data to identify and potentially predict the possibility of future risk being introduced, i.e. within an acquiring bank’s merchant portfolio.

The challenge that risk professionals now face is in understanding what to do with those predictions and correlations identified.  The difficulty lies not only in the vast amounts of big data collected, but also in the increasing complexity of the risk environment in global business relationships.  Enter the concept of “prescriptive analytics”.  Prescriptive analytics combines business rules with mathematical and computational sciences, along with big data, to make predictions that are used to enable targeted business decisions.

In the field of enterprise risk management, G2 Web Services stands out as one of the leaders and pioneers in incorporating prescriptive analytics.  G2 analyzes predictive and indicative data information, and provides actionable, prescriptive analyses to clients.  G2 is currently piloting the implementation of custom business decisioning tools with an API interface direct into a major acquiring bank’s in-house merchant due diligence boarding solution.  The client provides G2 with key data sources, and G2 analyzes their information with proprietary scoring and predictive analytics to prescribe next steps in the boarding process.  This process occurs at high velocity in near real time, and in pilot, has saved significant time in the client’s merchant onboarding process – reducing cost while increasing accuracy with the power of prescriptive analytics.

As President of G2, I am proud to be part of this pioneering group of professionals exploring the intersections of risk management, big data, computing and advanced statistics.  Our team is excited to push these boundaries to better serve our clients, while transforming the understanding of businesses, payments and transactions through the development and implementation of prescriptive analytics tools.

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