Decision management and business rules management systems are the ideal platform for an agile and cost-effective compliance approach. In regulated industries like financial services, leading companies are building compliance into every process and system with consistency and transparency across the entire organization and with the agility to meet ever more challenging deadlines. Companies that fail to do so incur huge costs with manual checks and balances and risk significant fines. In this webinar James Taylor, CEO of Decision Management Solutions and Jan Purchase, Director and Founder of Investment Banking Specialists Lux Magi, share know-how and best practices from their extensive experience of helping clients implement decision management and business rules management systems to conquer complexity, improve agility, lower costs and measure ongoing effectiveness in financial compliance. The webinar includes illustrations of how the decision management approach has been applied in compliance projects and a walkthrough of real decision model from one of these.

1. Agile and Cost
Effective Financial
Compliance
Going Beyond
Business Rules with
Decision Management
JamesTaylor,
CEO

2. ©2014 Decision Management Solutions 2
Your Presenters
James Taylor
CEO of Decision
Management Solutions
We help clients to improve
their business by applying
business rules and analytic
technology to automate and
improve decisions
I have spent the 11 years
championing Decision
Management and developing
Decision Management
Systems
Jan Purchase
Director Lux Magi
We enable investment banks
to automate demanding
financial compliance
regulations, against
challenging deadlines, through
the application of business
rules, business decision
modelling and business
decision management
systems

3. Agenda
Compliance
Challenges in Compliance
The Business Rules
Advantage
Decision Management
The Essential Framework
Worked Examples
3©2014 Decision Management Solutions

4. Aims of Compliance
Capital Adequacy
Basel II/III, Solvency II
Reporting and Disclosure: FED 5G
FED 5G, MCO, FATCA
Capital Management
Dodd-Frank, FED Eligibility
Customer Protection
MiFID
©2014 Lux Magi Ltd 4

5. 5
Basel II
Dodd-Frank
FED 5G
Solvency II
FATCA
Basel III
Capital Adequacy
Capital Management
Reporting and Disclosure
Timeline
©2014 Lux Magi Ltd

6. Why is Compliance Demanding?
Challenging Pre-requisites
Data standardisation and quality
Reference data alignment and consistency
Cross Department Impact
Short ‘Time to Market’
Many Intersecting Rules for Special Cases
©2014 Lux Magi Ltd 6

7. What Do Compliance Rules Share?
Automation Is Required
Application Throughput Frequency
Need for Swift Remediation
Very Exceptional Escalation for Manual Decisions
Repeatable
Subject to General and Specific Audit
Temporality
7©2014 Lux Magi Ltd

8. Challenges in Compliance
5 Measuring Effectiveness
Near Real Time Management of Faults
Ability to Self Check
Immediate Articulation of Issues
Improvement OverTime
Explicit Articulation and Management of Goals
Continuous Monitoring and Improvement
Meaningful Metrics
How to define them
How to associate them with the rules
8©2014 Lux Magi Ltd

9. Time to Market
Many mandates have implementation times < 1 year
Fast Resolution of Issues/Imposed Changes
‘Expedited’ change cycle often less than one day
Risk/Cost of errors is high
Requires aids to comprehension, impact analysis
Many sources of externally imposed change
All change needs to be strongly audited
Closure controlled and logged
Challenges in Compliance
4 Agility
9©2014 Lux Magi Ltd

10. Challenges in Compliance
3 Consistency
Initiatives Often Impact Many Systems
Need to ensure they all behave coherently
Can’t implement policy changes in each
Need a common approach at different points
of complex business process
Facilitating Inter-Departmental Integrity
Instrument Data Sourcing for Multiple Feeds
Platform Ubiquity and Reuse
10©2014 Lux Magi Ltd

11. Challenges in Compliance
2 Transparency
Precision
Convey meaning in business terms
You cannot safely change what you don’t understand
Standard representation to make sharing easier
Traceability
Which rules were used?
Why where they selected?
What authority justified them?
Can the regulation be seen to have been followed?
11©2014 Lux Magi Ltd

12. Each Mandate Adds Complexity
Few points of high complexity, just a sprawl
Large number of information sources and variations
Many hidden interdependencies between rules
Vital to Impose Structure, Otherwise…
Difficult to comprehend, change, assess impact
Becomes an amorphous ‘bag of rules’
Loss of integrity and consistency: gaps, overlaps
Business Rules Alone Can’t SupportThis
We Need a Larger Organising Principle
Challenges in Compliance
1 Scale
12©2014 Lux Magi Ltd

13. 13©2014 Decision Management Solutions
Scale
Transparency
Consistency
Agility
Effectiveness

14. The Business Rules
Advantage

15. ©2014 Decision Management Solutions 15
Business Rules Drive Compliance
But policies and
regulations are
hard to manage

16. ©2014 Decision Management Solutions 16
Business Rules Deliver Transparency
Scale
Transparency
Consistency
Agility
Effectiveness

17. ©2014 Decision Management Solutions 17
Business Rules Deliver Agility
public class Application {
private Customer customers[];
private Customer goldCustomers[];
...
public void checkOrder() {
for (int i = 0; i < numCustomers; i++) {
Customer aCustomer = customers[i];
if (aCustomer.checkIfGold()) {
numGoldCustomers++;
goldCustomers[numGoldCustomers] = aCustomer;
if (aCustomer.getCurrentOrder().getAmount() > 100000)
aCustomer.setSpecialDiscount (0.05);
}
}
}
If customer is GoldCustomer
and Home_Equity_Loan_Value is more than $100,000
then college_loan_discount = 0.5%
College Loan Discounts
Current Discount =
Eligibility
Gold Customer and
Home Equity Loan more than $100,000
%
Which would you
rather change?
Scale
Transparency
Consistency
Agility
Effectiveness

18. ©2014 Decision Management Solutions 18
Hard To Measure Effectiveness
Rarely just one rule
Many rules must be executed
to deliver improvement
Mapping rules to KPIs does
not work
Scale
Transparency
Consistency
Agility
Effectiveness

19. ©2014 Decision Management Solutions
Hard To Scale
19
Scale
Transparency
Consistency
Agility
Effectiveness
Lots of regulations
Lots of policies
Lots of rules
No structure

20. Hard To Be Consistent
Rules spread across processes
and systems like Peanut Butter
20©2014 Decision Management Solutions
Scale
Transparency
Consistency
Agility
Effectiveness

21. Decision Management
The Essential Framework

22. ©2014 Decision Management Solutions
Decision Management
A business discipline and a technology stack
That builds on existing IT infrastructure
Enhancing business processes
Increasing transparency and business control
Leveraging analytics to manage uncertainty
It is a proven framework
for implementing business
rules management systems
22

23. Business Processes
©2014 Decision Management Solutions 23
Decisions At The Center
Analytics
People
KPIs
Customers
Systems
Decision

24. ©2014 Decision Management Solutions 24
Put Decisions In Context
Know which business
processes will be improved by
your rules
Know when your rules will be
needed to make a decision
Know how you will have to
deploy your rules to automate
decisions
Know who needs to be
involved in elicitation and
manage - and why
Scale
Transparency
Consistency
Agility
Effectiveness

25. ©2014 Decision Management Solutions 25
Tie KPIs to Decisions
KPIs impacted by decision
Capital
Adequacy
Accuracy of
Liquidity
Profile
Accuracy
of Risk
Reporting
… …
Is this instrument eligible for
use as collateral * *
What is the asset class of this
instrument? * *
What is the worst credit rating
of this instrument? * * *
…
Scale
Transparency
Consistency
Agility
Effectiveness

26. ©2014 Decision Management Solutions 26
How To Describe Decisions
Information
• What is needed?
• Where does it come
from?
Know-how
• How to make it
• How to improve it
Precision
• Exactly how?
• Specificity without
technical details

27. ©2014 Decision Management Solutions 27
Decisions Require Information
“Determine Federal Reserve Eligibility”
requires Currency Classification and Eligibility
“ValidateTax Return”
requires Return and Citizen information
“Refer claim for fraud”
requires Claim and Provider information

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Decisions Require Knowledge
“Determine Federal Reserve Eligibility”
requires Collateral Guidelines andVolatility
“ValidateTax Return”
requiresTax Regulations
“Refer claim for fraud”
requires likelihood of fraud

29. ©2014 Decision Management Solutions 29
Decompose Decisioning
What is required to make decision?
Information
Guidelines, policy
Expertise
Regulations
Predictive Analytic Models
Data Mining Results
The results of other decisions

30. ©2014 Decision Management Solutions 30
Decisions Require Decisions
These decisions must be made first
Scale up and down
Scale
Transparency
Consistency
Agility
Effectiveness

31. ©2014 Decision Management Solutions 31
Decision Models Improve Compliance
Transparency
of Sources
Consistent Rule
Groups
Scale and Reuse

32. ©2014 Decision Management Solutions
Decision Models Deliver Traceability

33. ©2014 Decision Management Solutions
Decisions Models: Agile Automation

34. Decision Modeling and Notation (DMN)
“… provide a common notation that is readily
understandable by all business users... DMN creates a
standardized bridge for the gap between the business
decision design and decision implementation.”
Use Cases
Modeling Human Decision-making
Modeling Requirements for automated Decision-making
Implementing automated Decision-making
OMG Beta Specification
Released Standard expected mid-2014
Decision Management Solutions, IBM, Oracle,TIBCO, FICO, Escape
Velocity, KUL, Model Systems, KPI,Visumpoint
©2014 Decision Management Solutions

35. Walkthrough
Decisions First Modeller Example
FED Eligibility and Asset Classification
Will Address All of the Issues We’ve Discussed
35©2014 Lux Magi Ltd

36. Walkthrough
We’ve Seen How…
Scale is Addressed by Providing Structure
Transparency is Addressed by Linking to Sources
Effectiveness Measurements are Built in
Consistency Support by Process/Event/Decisions
Agility
Handled by impact assessment (shown)
Deployment to BRMS (not shown)
36©2014 Lux Magi Ltd

37. Questions?

38. Recap and Next Steps

39. Succeed with Decisions

40. Decisions First
Decisions first, rules second
Make Decisions part of Business Architecture
Adopt Decision Modeling
40©2014 Decision Management Solutions
Scale
Transparency
Consistency
Agility
Effectiveness

41. DecisionsFirst Modeler
Social, collaborative, cloud-based Decision Management
modeling software that puts decisions at the heart of your
business architecture, building better requirements and
driving successful business rules implementations
41©2013 Decision Management Solutions
decisionmanagementsolutions.com/decisionsfirst-modeler

42. Free Companion White Paper
Download the companion
white paper
http://www.decisionmanageme
ntsolutions.com/whitepaper/
rapid-and-cost-effective-
financial-compliance/
42©2014-15 Decision Management Solutions

43. Thank You
JamesTaylor
james@decisionmanagementsolutions.com
Jan Purchase
purchase@luxmagi.com
More on Decision Management at
decisionmangementsolutions.com
luxmagi.com