Risk assessment expert system for new customers in a bank, company!

1.
Damascus University
Faculty of Information Technology Engineering
Artificial Intelligent Department
Knowledge-Base Systems
04 - 22 - 2019
Knowledge-Based System Homework
The assignment is to build a risk assessment expert system for new customers
in a bank, company …
Let's assume that a new customer wants to open a new account in Adnan
Hussein bank, the Bank requests the following information from the customer:
Personal information national number, first name, father name, last
name, mobile, address, country, city, nationality,
gender, birth date, marital status
Customer information customer type ( individual, joint, minor, VIP
non-profit entity), branch, business nature, source
of income, average yearly income, deposit
threshold, withdrawal threshold, Beneficiary is
Account Owner ( yes , no )
table -1
the risk of the customer will calculate cumulatively based on the following
factors:
● Nationality
● Transactions
● Business nature
● Inquiry by CML
● Beneficiary is not Account Owner
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2.
Each risk factor:
● measured according to the following:
○ Reputation
○ Financial or Legal
○ Operational
● Controlled according to the following:
○ Adherence
○ Controls Systems
○ Procedures
Before we talk about the factors, let's talk a little bit with numbers..
Mapping for risk:
Risk Impact High Med Low
Risk Impact Value 80 50 30
Risk Factor Reputation Financial/Legal Operational
Risk Factor Weight 100 80 60
table -2
Value of Inherent Risk:
Value of Inherent Risk =
(∑Risk Impact Value * Risk Factor Weight) / (∑ Risk Factor Weight)
equation -1
Example:
Let's assume that one factor has the following subfactor:
● Reputation: High
● Financial or Legal: Med
● Operational: Low
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3.
What is the Value of inherent risk ?
From the table -2, the risk impact values of the subfactors are:
● Reputation: 80
● Financial or Legal: 50
● Operational: 30
And the risk weights of the subfactors are:
● Reputation: 100
● Financial or Legal: 80
● Operational: 60
From the equation -1 :
Value of Inherent risk = ( 80*100 + 50*80 + 30*60 ) / ( 100 + 80 + 60 ) = 57.5
Controls:
Control Evaluation Strong Adequate Poor
Control Evaluation Value 80 50 30
Control Factors Adherence Controls Systems Procedures
Control Factor Weight 100 80 60
table -3
Value of Control Risk:
Value of Control Risk =
(∑Control Evaluation Value * Control Factor Weight) / (∑ Control Factor Weight)
equation -2
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4.
Example:
Let's assume that one factor has the following subfactor:
● Adherence: Strong
● Controls Systems: Adequate
● Procedures: Strong
What is the Value of Control Risk ?
From the table -3, the Control Evaluation Values of the subfactors are:
● Adherence: 80
● Controls Systems: 50
● Procedures: 80
And the Control Factor Weights of the subfactors are:
● Adherence: 100
● Controls Systems: 80
● Procedures: 60
From the equation -2 :
Value of Control Risk = ( 80*100 + 50*80 + 80*60 ) / ( 100 + 80 + 60 ) = 70
Residual Risk:
Residual Risk Value = ( inherent Risk Value + ( 2 * (100 - control value))) / 3
equation -3
Example:
Let's assume that one factor has the following:
● Value of Inherent risk = 57.5
● Value of Control Risk = 70
What is the ​Residual Risk Value​ ?
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5.
Residual risk value = ( 57.5 + ( 2 * (100 - 70 ))) / 3 = 39.1
Residual risk scale
23-35 Low
36-55 Medium
56-73 High
table -4
The class of the previous risk factor is ​Medium​.
Now we know how to classify each risk factor! so let's talk about them..
classify risk factors:
Nationality:
If​ the customer nationality from the following nationalities:
‫اﻓﻐﺎﻧﺴﺘﺎن‬
AFGHANISTAN
‫اﻟﺠﺰاﺋﺮ‬ ALGERIA
‫اﻷرﺟﻨﺘﻴﻦ‬ ARGENTINA
‫اﻟﺒﺤﺮﻳﻦ‬ BAHRAIN
‫اﻟﺒﺮازﻳﻞ‬ BRAZIL
‫اﻟﺼﻴﻦ‬ CHINA
‫ﻛﻮﻟﻮﻣﺒﻴﺎ‬ COLOMBIA
‫ﻛﻮﺑﺎ‬ CUBA
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6.
‫ﺟﻴﺒﻮﺗﻲ‬ DJIBOUTI
‫ﻣﺼﺮ‬ EGYPT
‫اﻟﻮﺳﻄﻰ‬ ‫ﻏﻴﻨﻴﺎ‬ EQUATORIAL GUINEA
‫ﻃﺎرق‬ ‫ﺟﺒﻞ‬ GIBRALTAR
‫اﻟﻴﻮﻧﺎن‬ GREECE
‫اﻟﻬﻨﺪ‬ INDIA
‫اﻧﺪوﻧﻴﺴﻴﺎ‬ INDONESIA
‫اﻹﺳﻼﻣﻴﺔ‬ ‫إﻳﺮان‬ ‫ﺟﻤﻬﻮرﻳﺔ‬ IRAN (ISLAMIC REPUBLIC)
‫اﻟﻌﺮاق‬ IRAQ
‫ﻟﺒﻨﺎن‬ LEBANON
‫اﻟﺪﻳﻤﻘﺮاﻃﻴﺔ‬ ‫ﻛﻮرﻳﺎ‬ ‫ﺟﻤﻬﻮرﻳﺔ‬
‫اﻟﺸﻌﺒﻴﺔ‬
KOREA,DEMOCRATIC PEOPLE'S REPUBLIC
‫اﻟﻜﻮﻳﺖ‬ KUWAIT
table -5
Then the subfactors are:
● The Values of inherent risk:
a. Reputation: High
b. Financial or Legal: High
c. Operational: Med
● The Values of Control Risk:
a. Adherence: Strong
b. Controls Systems: Strong
c. Procedures: Strong
Else​ the risk class of nationality is Low.
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7.
Business nature:
If​ the customer business nature from the following business natures:
● Lawyers
● Accountants
● Brokers who work for the benefit of the client
Then the subfactors are:
● The Values of inherent risk:
a. Reputation: Med
b. Financial or Legal: Med
c. Operational: Med
● The Values of Control Risk:
a. Adherence: Strong
b. Controls Systems: Strong
c. Procedures: Adequate
Else If​ the customer business nature from the following business natures:
● Trading of real estate
● Trading of Jewelry
● Trading of cars
Then the subfactors are:
● The Values of inherent risk:
a. Reputation: Med
b. Financial or Legal: High
c. Operational: Med
● The Values of Control Risk:
a. Adherence: Strong
b. Controls Systems: Strong
c. Procedures: Strong
Else​ the risk class of nationality is Low.
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8.
Transactions:
if ​the customer makes a transaction greater than the threshold then the
subfactors are:
● The Values of inherent risk:
a. Reputation: Med
b. Financial or Legal: High
c. Operational: High
● The Values of Control Risk:
a. Adherence: Strong
b. Controls Systems: Strong
c. Procedures: Strong
Else​ the risk class of transactions is Low.
Inquiry by CML:
If​ the customer inquiry by CML ​then​ he is High risk.
Beneficiary is not Account Owner:
If​ the Beneficiary is not Account Owner ​then​ he is High risk.
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9.
The Final risk Matrix:
after calculating each risk factor of the customer, we get the final risk class from
table -6.
Business Nature Nationalites Transactions Level
High High High High
High Med Med Med
High Low Low Low
Med High High High
Med Med Med Med
Med Low Low Low
Low High High Med
Low Med Med Low
Low Low Low Low
Med High Med Med
Low High Low Low
High Med High High
Low Med Low Low
High Low High Med
Med Low Med Low
Med Med High Med
Low Low High Low
High High Med High
Low Low Med Low
High High Low Med
Med Med Low Low
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10.
High Med Low Med
High Low Med Med
Low High Med Med
Low Med High Med
Med High Low Med
Med Low High Med
table -6
Do you think that the representation of the final risk by a matrix is
correct? please suggest another method, if any!
Practical Section Teacher: Ahmad Hussein
Email: ahmadhussein.ah7@gmail.com
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