-- Posted by Carole-Ann
We just hosted an introductory webinar on Predictive Analytics and I was amazed at the turn out. BRMS practitioners are now getting interested in mass... They are engaging with FICO into education, discussions, etc.
I never doubted that it was a good idea to mix and match predictive models with business rules. It adds an element of Precision that you don't get out of traditional business rules. Regulations and Expert judgment can't be mined of course but there is a good deal of intelligence that resides in those past transactions. You can find out what your customers are likely to buy, which ones are likely to go delinquent or to fraud. If you are better at finding those people than your competitors, you get an unfair advantage. You can offer red-carpet treatment to those customers that will be greatly profitable in the long run, and let your competitors fight for those that will cause collection fees and other types of losses. If both companies use predictive models, the one with the best insight will stay ahead of the other one, assuming of course that the strategy that uses that insight is sound!
So I wasn't so much interested in the why than I was in the why now....
All the signs in the economy are indicating that we are getting out of the recession. We are going to suffer for a little while because the unemployment rate will linger a little longer, especially with so many people not being able tor retire. The US are in debt. They are not the only country in the world... It is going to be a long way back up but many analysts seem to agree that we have reached the bottom and should expect growth from now on.
We have learned quite a bit in the process. We have learned about:
- the importance and value of predictive models -- Not having predictive models suitable for the new types of financial products increase the financial institutions' exposure to unprecedented risk levels (for more, read http://www.edmblog.com/weblog/2008/11/the-role-of-predictive-analytics-in-the-sub-prime-crisis.html)
- the lack of transparency in the processes can lead to diluted accountability -- This is no great surprise to anyone that bailout money comes with increased duties in terms of transparency and audit. Accountability is a joke when your name is not associated with any specific enterprise strategy that can be measured; it is not any more serious when, as a manager, you do not have visibility and control over the process or the results. Getting a better insight on the expected results of a policy change (minor or major) and having to sign up on this change in the way the whole company is doing business will lead to better enterprise performance
With those lessons learned, it suddenly makes sense that Enterprises pay more attention now than ever to Predictive Analytics in the context of Business Rules.
I am glad to see the change happening in the marketplace. Financial Services have been ahead of the curve in terms of using those Predictive Analytics, especially in the context of business policies. It is interesting to see increased interest in many different industries.