Edward Vaughan, senior director at LexisNexis Risk Solutions, looks at the potential costs of buying or building a risk orchestration platform. 

The benefits of orchestration

Risk orchestration is gaining incredible traction in regulated sectors. The technology can help firms optimise multiple sources of data and screening and monitoring tools that are used to detect and prevent financial crime. Unlike some traditional risk management strategies, risk orchestration can synchronise disparate processes, resulting in unified outputs and risk scores.

It’s a welcome antidote to the duplication of effort, conflicts, and delays that can easily and regularly occur during financial crime screening. Customers can be authenticated and validated quickly with reduced levels of friction that otherwise negatively impact user experience.

As more firms strive to realise these benefits, there’s now a noticeable trend amongst firms to build risk orchestration platforms in-house. The belief is that it’s the cost-effective route, but our recent analysis suggests otherwise.

Expensive self-build

We looked at the typical self-build orchestration costs for a mid-tier UK bank onboarding around 100,000 customers and processing an average of two million transactions per year. 

For a bank of this size, build costs would be around £3.1 million in the first year, with about a third spent on a team of developers to build and test software. Creating an API that can bring together multiple different data sources and systems can be complex and time-consuming. The remaining budget will go on annual licence costs and data fees, covering Identity and Verification (IDV), document verification, transaction monitoring, application fraud and AML screening. 

In years two and three, self-build calculations include annual license renewal costs and data fees, as well as the not-insignificant costs of maintaining and developing a platform to grow and adapt with a business. 

So, even conservative estimates will put costs for year two and beyond at over £1.3 million per annum for a self-built platform. That’s an approximate investment of almost £6 million in the first three years. 

Risk Orchestration – the cost-effective approach

Given that specialist software developers are typically the most expensive part of a self-build approach, the alternative could be to work with an expert partner to integrate a plug-and-play risk orchestration platform via a no-code API.

A specialist partner can draw on industry-wide insight and experience to help develop a solution that evolves with an organisation’s growth and can adapt to changing financial crime threats. Such solutions are also scalable, meaning a small-to-midsize firm can procure an affordable, yet high-performing platform, without it weighing heavily on the balance sheet. Economies of scale across licence and data fee costs can also be realised. 

Specialist orchestration platforms provide an automated, end-to-end solution for customer onboarding and ongoing monitoring, incorporating anti-money laundering screening, transaction monitoring and case management. With support from multiple data source providers, firms are free to stick with the vendors they know and trust, or can swap them out for others, at the same time benefitting from simplified vendor management.

The easy set-up and integration of a risk orchestration platform like LexisNexis® RiskNarrative™ is complemented by an intuitive interface and the ability to drag and drop services and apps. It eliminates the need for costly IT-led operations and interventions, saving firms both time and money. 

Best of all, our analysis suggests all this is achievable at around a third of the cost of a self-built solution over the first three years, freeing up more than £3.5 million to invest back into a business.  

All financial services firms want to prevent more fraud. At the same time, most firms are also under pressure to reduce compliance costs. Risk orchestration is the perfect tool to achieve both these opposing goals – the only question remaining is whether to buy or build a platform.

Join a free webinar on Tuesday 28th November at 2 pm, when leading industry analysts and experts will explore the build versus buy dilemma and the many benefits of a risk orchestration platform. Click here to register now.