How to choose a rules engine fit for your business

MARCIN NOWAK
January 31, 2024
Blog

The advent of rule engines, particularly business rules management systems (BRMS), has revolutionized how companies define rules, execute rules, and make informed decisions. These systems, including coding-based BREs and user-friendly, open-source options, cater to a range of needs, from simplifying simple rules to handling complex logical ones.

The core of these rule engines lies in their capacity to automate decision-making processes, significantly increasing efficiency in various aspects of business operations. By employing rule templates and enabling the creation of decision tables, these engines empower process owners to tailor decision-making to specific business needs. This automation extends to office administration, where manual decisions are transformed into systematic, programmed responses, leading to reduced costs and improved efficiency.

In the hands of industry analysts and business decision-makers, a business rule engine can become a powerful tool for shaping the future of enterprises, speeding up business decisions without the need to know programming language for non-technical people. They provide a framework to test rules, ensuring that each automated decision aligns with the company's strategic objectives. 

Furthermore, they enable businesses to integrate simple logic and complex decision trees into their existing systems, enhancing the ability to make quick, accurate, and consistent decisions without being dependent on IT teams.


The Role and Importance of Rules Engines in Modern Business

Business Rules Engines (BREs) are central to automating decision-making processes, streamlining complex tasks, and enhancing operational efficiency. These engines allow organizations to define complex business rules in a straightforward manner, often utilizing decision tables, which play a pivotal role in structuring and automating multifaceted business rules.

  • Enhanced Data Capabilities and AI Integration – BREs in insurance companies leverage consumer and market data to create AI-informed offerings for distinct segments. This personalized approach, supported by an automated infrastructure, leads to improved effectiveness, customer retention, and more efficient policy renewal processes​​.
  • Operational and IT Transformation – Insurers are deploying analytics-powered methods and digitally transforming their operations and IT to improve earnings, release capital, and strengthen margins. This transformation is crucial for insurers to remain competitive and manage the complexity of their operations effectively​​.
  • Streamlining Operations through Advanced Technologies – Automation, digital applications, and advanced-analytics engines streamline processes in insurance, allowing customers to self-serve during underwriting, servicing, and claims processes. This results in significantly lower expense ratios for digital-first companies compared to traditional insurers​​.
  • Risk Strategy Integration in Business Decisions – BREs enable a risk-informed approach to strategic and business decision-making. This integration ensures that core business processes and operations are executed on a risk-informed basis, aligning the risk profile with the business strategy​​.
  • Improvement in Enterprise Risk Management (ERM) – Insurers focus on improving their ERM capabilities, particularly in risk transparency, insight, and culture. This involves investing in analytics and enhancing risk reporting and stress testing processes, thereby enabling better strategic decisions and performance transparency​​.
  • Customer-Centric Business Models – The ideal end game for insurers using BREs is to create personalized, holistic insurance packages, integrating service and support across offerings. This customer-centric approach involves leveraging a variety of consumer and risk data, including sensors and telematics, to personalize coverage and reduce risks​​.
  • Risk and Compliance Function Transformation – Insurers are evolving their risk and compliance functions to be more agile and proactive. This transformation involves tapping into the power of advanced analytics and automation, allowing human judgment to focus on key processes and leveraging technology advances to evaluate exposures efficiently​​.


Understanding Your Business Needs and Goals

Understanding the implementation of Business Rules Engines (BREs) is crucial for modern organizations, especially within the context of Enterprise Risk Management (ERM) and strategic decision-making. While specific guidelines for BRE implementation are not directly outlined in the public domain materials of top consulting firms like McKinsey and PwC, their insights into ERM and risk management are highly relevant. McKinsey emphasizes the importance of integrating risk with strategy and financial management in ERM transformation programs, highlighting the need for risk-return transparency and the integration of qualitative factors in decision-making​​. 

Similarly, PwC's discussions on ERM and business continuity management stress aligning risk management strategies with business objectives​​. These principles are essential when implementing BREs, as they necessitate understanding the organization's risk profile and ensuring that the BRE aligns with broader business strategies and operational goals. Therefore, grasping these concepts is vital for successfully leveraging BREs to automate and streamline decision-making processes in a business environment.

Identifying Core Requirements

To effectively implement a Business Rules Engine (BRE), understanding your organization's specific needs and objectives is crucial. This involves a comprehensive analysis of your business processes to identify areas where decision automation can significantly enhance operations. Business analysts are key in this stage, breaking down complex business logic to determine where a BRE can optimize processes. 

Aligning BRE Capabilities with Business Goals

Once your business's core requirements are identified, the next step is aligning them with the capabilities of a BRE. This means ensuring the selected system can effectively manage and enhance your specific decision-making processes. Debevoise's insights highlight the importance of selecting a BRE that manages and amplifies your business logic, leading to improved outcomes. 

For instance, in areas like credit risk rating and derivatives trading, he discusses how business rules have successfully modeled complex decision-making processes, offering a more traceable and manageable approach compared to traditional methods like spreadsheets and computer code.

Practical Application and Optimization

In practical scenarios, this involves choosing a BRE that can handle the specific complexities and nuances of your business. Whether it's about managing customer relationships, optimizing inventory, or ensuring compliance, the chosen BRE should offer solutions that are both theoretically sound and practically applicable. 


Evaluating Technical Capabilities and Integration Potential

Assessing Technical Proficiency

When choosing a Business Rules Engine (BRE), it's essential to evaluate its technical capabilities to ensure it meets your business's specific requirements. This includes assessing support for various programming languages, handling complex logic, and management of input data. The technical proficiency of a BRE determines how well it can integrate and automate complex decision-making scenarios within your business framework.

BREs must have the capability to handle complex technical requirements, advanced functionalities like conditions, aggregation, and lookup tables or trees, and be intuitive for non-technical users to manage rules​.

Integration with Existing Systems

Another crucial factor is the BRE's potential for integration with existing systems. This involves examining how the BRE interacts with your current IT infrastructure, including databases and application interfaces. The goal is to ensure a seamless integration that enhances, rather than disrupts, existing workflows. A BRE should be able to connect with various data sources and applications, providing a unified platform for managing and executing business rules.

Implementing Business Logic 

The ability to effectively implement and manage business logic is a key aspect of a BRE. This includes creating decision tables, which offer a structured way of defining and executing rules. Decision tables simplify the representation of complex logic, making it easier for business users to understand and modify rules as needed.

Cost and ROI Considerations

Evaluating the Cost of Implementation

When selecting a Business Rules Engine (BRE), it's important to consider the cost of implementation, which includes the initial purchase, integration, and any ongoing maintenance expenses. This evaluation should encompass not just the monetary aspect but also the time and resources required for implementation and training of personnel.


Analyzing Return on Investment (ROI)

The ROI of a BRE is a critical consideration. This involves assessing how the BRE will contribute to operational efficiency, decision-making accuracy, and overall business performance. A well-implemented BRE can lead to significant cost savings by automating complex decision-making processes, reducing the need for manual intervention, and minimizing errors. Additionally, it can enhance customer satisfaction through faster and more accurate responses, and improve compliance with regulatory standards, potentially avoiding costly fines.


Balancing Cost with Business Value

While cost is a key factor, it's equally important to balance this with the potential business value a BRE can bring. This includes considering the long-term benefits such as increased efficiency, better risk management, and the ability to quickly adapt to market or regulatory changes. The chosen BRE should align with your business's strategic goals and offer a clear path to achieving a positive return on investment.


Cost-Effectiveness for Different Size Enterprises

The cost-effectiveness of a BRE can vary based on the size and nature of your enterprise. For smaller businesses, a BRE with a lower upfront cost but scalable capabilities might be ideal. Larger enterprises, on the other hand, may benefit more from a comprehensive solution that, while more costly, offers extensive customization and integration capabilities to align with complex business processes.


Maximizing ROI through Strategic Implementation

Strategic implementation involves aligning the BRE’s capabilities with your most critical business areas. For example, in sectors where compliance is crucial, a BRE that robustly handles regulatory changes can offer substantial ROI by reducing non-compliance risks. Similarly, in customer-focused industries, a BRE that enhances customer experience through personalized interactions can offer significant returns.

Conclusion

Choosing the right BRE is a decision that can significantly influence the efficiency, adaptability, and overall success of your organization. It requires a careful analysis of your current and future business requirements, a thorough understanding of the BRE's technical capabilities, and a keen eye on its potential ROI. By considering these factors, businesses can select a BRE that not only meets their immediate needs but also supports their long-term strategic goals.

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