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7/28/2005
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Uncover Patterns In Processes

Complex-event processing consists of monitoring the whole set of events that make up a business process and can help companies comply with regulations

Business-process automation has typically meant defining a well-established business process and automating each step so that human intervention is no longer needed to see that processes are completed.

But linear business-process automation isn't enough. What's needed is the ability to monitor the stream of small events that make up a set of business processes, including the events that precede a business transaction and those that come after it. Such an approach is known as "complex-event processing," says Stanford University professor David Luckham, author of The Power Of Events: An Introduction To Complex Event Processing In Distributed Enterprise Systems (Addison Wesley; 2002).

For example, trading goods across national boundaries is a business process that consists of a whole series of events that end with a currency-conversion transaction. In complex-event processing, the focus is on the many steps that make up a process, both those immediately connected to it and those one or more steps removed from it. By monitoring such events and aggregating a record of them, patterns emerge that help define normal and abnormal processes and improve the ability to monitor business activities. Such monitoring would be useful in guaranteeing compliance with new regulations, such as the Sarbanes-Oxley Act, and preventing fraud.

A complex-event-processing system, for example, would have caught Nick Leeson, the Barings Bank futures trader who in 1995 racked up $1.3 billion in losses before being discovered. At the time, Leeson was both trading manager and manager of back-office systems at Barings' Singapore office. Holding both positions made it possible for him to illegally hide his losing trades in an inconspicuous error account. But the simplest analysis of his activities--by human auditors or automated systems--would have quickly revealed how Leeson's trading was deviating from established processes and raised a red flag, Luckham says.

"One of the most basic elements of complex-event processing is being able to spot patterns" and determine whether they fall inside or outside expected or accepted norms, he says.

If business-process analysts could see all the processes running in their operational systems, they would realize that such processes, especially ones that respond to changing markets, are "composed of lots of lower-level events," which call for automated systems that can recognize, aggregate, and correlate related events, Luckham says.

Business-process-automation systems can do part of the job by automating defined steps. Business-rules engines enforce norms over a business process. And high-performance databases can keep relevant data in a system's main memory for rapid checking and analysis. Event-stream processing, such as a system monitoring the flow of stock-ticker information, is a specific form of complex-event processing.

But few IT systems today really perform complex-event processing across multiple systems. Nevertheless, some companies are using rules engines, databases, or customized systems to take the first steps toward complex-event processing.


Complex-process monitoring helps American Electric stop overpayments, Sullivan says.

Complex-process monitoring helps American Electric stop overpayments, Sullivan says.
American Electric Power Co., one of the largest electricity generators and distributors in the United States, does business with many vendors--and writes many checks to pay them. The company receives invoices in multiple ways that can lead to duplication and confusion, says Michael Sullivan, director of accounting services at American Electric. Invoices arrive in the mail, by fax, and by EDI. Duplicate versions get into American Electric's accounting system under different invoice numbers. Tracking all invoices, performing cross-checks, and singling out those most likely to represent double payments requires constant human surveillance, he says.

Since January, American Electric has been using what Sullivan calls a silent auditor from Oversight Systems Inc. The Oversight Controls Library links American Electric's accounts-payable system to Oversight's audit tests. A second product, the Secure Audit Lockbox, logs all activities on incoming invoice transactions, captures anomalies and alerts, and stores them in an encrypted database.

Instead of viewing invoice payment as a single, rigid business process, American Electric treats invoice processing as a set of complex interactions that may require double-checking with systems outside those doing the processing. Two invoices for the same amount may, in fact, be one payment owed to a vendor that has submitted two invoices. By checking a master-address database and an archive of the previous locations for sending payments, Oversight can determine whether the two payments are legitimate or if one should be canceled.

Such a system also helps prevent fraud by an employee who could circumvent safeguards in American Electric's accounting system. "Did someone enter a vendor, then enter the name again under a different address?" Sullivan asks. Finding a double entry would trigger a review of who was involved by analyzing the data in the Secure Audit Lockbox.

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