The diverse firms that make up the fiercely competitive mortgage banking industry are united in a common mission to fulfill the American dream of homeownership. They share a common enemy as well, battling to fight what one Enterprise Rule Steward called “insidious rules and workflow errors,” that can send operational risk through the roof.

At the National Technology in Mortgage Banking Conference held recently in Orlando, senior level executives came together to explore the latest technology. In public sessions and one-on-one conversations, these professionals consistently identified operational risk as a top priority.

Operational risk -- direct or indirect losses resulting from inadequate or failed internal processes, people, and systems or from external events – is a fact of life for every company, in every industry. It may surface as human errors, process inefficiencies, fraud, or even a company’s difficultly to respond quickly to hot new trends or opportunities. At the core, however, operational risk has its roots in business logic and process errors that are lurking within IT systems, policy manuals and minds of a company’s operations staff.

Business rules and workflow technology can offer relief by increasing process efficiency and systematically mitigating risk. In the banking industry, for instance, a typical application uses business rules and workflows to automate the manual processes used to resolve a single delinquency on an individual account. In addition increasing efficiency, the company has the added benefit of using business rules to check all existing accounts for similar problems and using workflow to take action to prevent future delinquencies.

The cost of errors

A recent study of enterprise businesses by the Delphi Group explored how errors in business requirements capture can impact operations and business performance. The majority of respondents cited significant problems gathering business requirements, with 69 percent calling it “difficult and painful” and 94 percent reporting their belief that their requirements are incomplete or wrong. To contain this risk, mortgage banks are looking to their risk management teams, led by the Chief Risk Officer, to go beyond their initial charter and become instrumental in providing services and solutions to problems at every level of the organization.

"The legal and regulatory environment practically mandates that all companies – big and small – develop a risk management strategy,” said David Matthews, Senior Vice President, CIO at Federal Home Loan Bank of Chicago. “Your new best friend ought to be the Chief Risk Officer."