ClusterSeven: architects for holistic and strategic risk management

By Brittany Hill

Henry Umney, CEO of ClusterSeven discusses industry trends and his predictions for 2020.

Could you tell me a little bit about your company and your role at the company?

We provide Shadow IT solutions for compliance, risk management and governance to Fortune 250 companies and to the banking and financial services sector. A third of the world’s top 30 banks are clients as well as multiple leading insurers, investment managers and energy firms. 

Organizations deploy enterprise IT systems for business operation, but equally many business-critical processes reside in Shadow IT (non-IT supports applications – e.g. spreadsheets, databases, business intelligence systems, etc.). These applications and processes form a significant part of financial institutions’ ‘business-as- usual’. The Shadow IT tools are popular with end users, because they are easy to deploy, powerful, and can quickly address important business issues often involving business management, portfolio management, product development, management and regulatory reporting. 

However, the user-maintained applications are typically uncontrolled and unmonitored, and so pose a threat to organizations’ operational resilience. For instance, poor-quality data, entered directly or acquired from a linked spreadsheet can impact the quality and value of a model or calculation, materially affecting the availability or performance of a business service or offering. Our solutions provide a framework for control of the Shadow IT environment, which today is a regulatory requirement. 

In my capacity as CEO, I’m responsible for the general management of the business including its P&L, developing new strategies for growth, relationships with clients and partners and everything in between. 

What are the current trends within your industry?

Evolving regulatory scrutiny on internal and auditory controls is the most prominent trend today, not just in the US, but globally.  For example, the Federal Reserve has recently highlighted that while the US banking and financial services sector is sound and profitable, there are inherent “non-financial weaknesses” that could potentially jeopardise the operational resilience of institutions. The Federal Reserve’s latest Supervision and Regulation Report 2019 highlights these issues as matters requiring immediate attention (MRIAs), referring to internal controls around IT governance and risk management. Other regulators too are demanding that institutions pay attention to model risk management, data management, IT infrastructure, internal auditory controls and such. Examples are SR 11 7, MIFID II, Solvency II, IFRS 9, BCBS 239, SOX and SS 3/18.

Balanced against this are the economic drivers facing US institutions. With low interest rates, and strong competition, growing the bottom line depends on managing the cost base very efficiently, while innovating with new products and services to increase the revenue base. Banks are investing heavily in their modelling function to help deliver both these, using them to explore areas to develop new services, while using scalable data and analytics, and leveraging automation to drive efficiencies. These efficiencies are aimed at helping make the best use of scarce and valuable modelling teams, while also enhancing their productivity and business value.  

What makes your company competitive?

Our solutions can help organizations identify, monitor and mitigate operational risk emanating from unstructured and uncontrolled use of Shadow IT. What makes us stand out is that we are completely industry agnostic and so our solutions are deployed across sectors and business lines. 

Our solutions are not department specific but have been architected for the enterprise. This helps our customers adopt a holistic and strategic approach to Shadow IT risk management and governance in order to strengthen the areas of “non-financial weaknesses”, as the Federal Reserve calls it. 

The core value of ClusterSeven comes from its ability to combine expertise, experience and functionality to address a range of intractable, but critical business issues. We enjoy long term relationships with our customers, so are in a good position to provide practical advice about how their implementation of our platform can be utilised to support a change to their business.  

This expertise also extends to our extensive partner community, that offers a range of complementary services to help customers solve complex technological, operational and commercial challenges. These challenges can go well beyond our core areas of expertise. 


Our relationships also extend to working with industry Associations, including the American Bankers Association and Financial Managers Society, to educate their members about options open to them in resolving their current array of issues. It also provides us with their unique perspective on industry issues, which we discuss further with customers and prospects. 

What innovations has your company been developing during 2019?

The most exciting project we have been working on in 2019 is preparing for the launch of our new Model Risk Management (MRM) solution, which will take place in Q1 2020. We are launching an innovative approach to MRM that takes institutions away from the large enterprise GRC platforms often pressed into service for MRM environments. The solution will provide agile MRM capabilities that will allow users to implement a comprehensive MRM environment in weeks, not months or even years. The customers we have worked with to develop this approach have provided excellent feedback and recommendations that we have incorporated in the solution. This collaborative approach has also helped us to understand their challenges in more detail, and we are very grateful for their support and insights. 

What are your predictions for the industry in 2020?

Geo-political, regulatory and technological complexities will make model risk, operational resilience and SM&CR key focus areas for the banking and financial services sector and indeed more widely across industry in 2020. 

Modelling will become central to commercial operations, making model risk management a constant business theme. Due to general uncertainties in the geo-political landscape – trade wars, Brexit, Middle East tensions, etc. – these events are likely to cast a shadow over the global economy. With reports signalling a slowdown, business operations will look to their modelling teams to seek opportunities outside of its traditional remit, placing a heavy reliance on this niche function. Alongside this, with the availability of advanced machine learning/artificial intelligence-led tools, firms will look to leverage them to gain operational efficiencies, which again will place a reliance on technical staff who are familiar with these technologies.  The multifaceted economic, business and technological complexity will create the perfect storm, greatly increasing the risk of modelling errors, which potentially could have crippling commercial and regulatory consequences. This will make model risk management important as organisations will need to take concrete measures to pre-empt commercially impacting errors and evidence best practice model management to auditors and regulators.  

With most regulators demanding ‘operational resilience’, organisations will need to take a joined-up approach to regulatory compliance, as opposed to the siloed methodology that exists today. 

Interestingly, the UK’s Senior Managers & Certification Regime (SM&CR), which is the first of its kind in the world and potentially the strongest regulation of people in business thus far – will begin to be adapted by regulators globally, including the US. Already, countries including Australia, Canada, Singapore and Ireland are considering ‘light’ implementation of the regulation. This regulation enforced individual accountability for senior executives in industry.  

Is there any exciting news you’d like to share with our readers at Business Chief USA?

Alongside our new MRM solution, we will be working with Chartis, the respected industry analysts, who are researching alternative approaches to the challenges of MRM, that do not necessarily involve vast IT project and budgets. We will be exploring the points raised at the GFMI Model Risk Management Conference in San Francisco on 29-31 January 2020. The report will also be available from the ClusterSeven website in due course. 

For more information on business topics in the United States, please take a look at the latest edition of Business Chief USA.

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