Wrestling with Risk Management of ACH Originators with Guests Nanci McKenzie and James Rowe
Wrestling Payments Podcast: Season 1 - Episode 7
Episode Summary
In this episode of Wrestling Payments, host Joe Casali welcomes Nanci McKenzie and James Rowe from Affirmative Technology. They dive into the challenges of creating a risk rating for originators in the payments industry.
The conversation highlights the importance of risk management in financial institutions. Nanci and James discuss the need for automated solutions to handle the increasing volume of transactions. They emphasize that manual methods and spreadsheets are no longer sufficient. The discussion also touches on the role of regulators and the pressure they put on institutions to have robust risk management systems in place.
The episode concludes with a look at the broader economic landscape. James, an economist, shares his insights on the potential impact of rising interest rates and the debt ceiling issue on financial institutions. He also offers his perspective on the current state of the economy and its implications for banks. This episode is a must-listen for anyone interested in the intersection of risk management and the payments industry.
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Guest-at-a-Glance
💡 Name: Nanci McKenzie and James Rowe
💡What they do: Executive Vice President of Compliance and Product Strategy and Chairman of the Affirmative Technology Board
💡Company: Affirmative Technologies
💡Noteworthy: An industry veteran, Nanci McKenzie is known for her expertise in risk management and compliance in the payments industry. / An economist by training, Rowe specializes in leveraging data analytics to solve key business problems in the financial sector.
💡 Where to find them: Nanci: LinkedIn｜James: LinkedIn
Key Insights
âš¡Automated Risk Rating for Originators
Wrestling Payments delves into the need for automated risk rating for originators in the payments industry. Nanci and James discuss how their tool, Navigator, can provide accurate ratings for originators based on their transaction history. This system allows financial institutions to prioritize their focus on high-risk originators, enabling efficient risk management. The tool also allows for monitoring originators' risk transition, providing valuable insights into their business activities.
âš¡Embracing Data Analytics
James, an economist by training, emphasizes the importance of embracing data analytics in financial institutions. He demystifies terms like AI, machine learning, and big data, explaining that these are simply automated statistical techniques that have been around for decades. James encourages financial institutions not to be intimidated by these terms but to leverage them to make effective decisions.
âš¡Regulatory Pressure and Risk Management
The podcast also highlights the increasing regulatory pressure on financial institutions to have robust risk management systems. Nanci points out that regulators are asking institutions how they are risk grading their customers and are taking enforcement actions based on their findings. This underscores the importance of efficient risk management systems, such as the one provided by Affirmative Technologies.
Episode Highlights
The Importance of Risk Management
Timestamp: [00:12:02]
The conversation delves into the essence of risk management in financial institutions. Nanci explains the need to identify risks and implement controls to mitigate them. She emphasizes the importance of automation and business intelligence in managing risks effectively.
"Risk management is just the need to identify what those risks are and to determine, do I have the controls in place to mitigate those risks into a more acceptable level so that my financial institution can be more confident in knowing that we're gonna limit the amount of risks."
The Role of Data Analytics
Timestamp: [00:04:11]
James, an economist, discusses his background and the role of data analytics in solving key business problems. He shares his experience at Capital One, where data analytics was used to identify and solve business problems.
"I specialize in leveraging data and data analytics in a way that helps businesses solve important problems. [...] What Capital One did was apply data analytic techniques to help identify and solve key business problems."
The Impact of Economic Variables on Financial Institutions
Timestamp: [00:36:25]
James provides insights into the potential impact of economic variables such as interest rates and the debt ceiling issue on financial institutions. He explains how increases in interest rates could strain the balance sheets of banks.
"Continued increases in interest rates are really gonna put a lot of strain on balance sheets of banks because [...] when interest rates go up, that government debt becomes worth less."
The Role of the Board in Risk Management
Timestamp: [00:32:07]
The discussion turns to the role of the board in risk management. Nanci emphasizes that while the board can delegate risk management responsibilities to a committee, they are ultimately responsible for the risks of the institution.
"They are ultimately responsible for the risks of the institution overall. There is no getting around that. It is their responsibility, and they need to know what is going on under their noses."
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