Who Owns the Algorithm Establishing Governance for Your Financial Tech

Published on: Sat Feb 01 2025 by Ivar Strand

Who Owns the Algorithm? Establishing Governance for Your Financial Tech.

When a financial system automatically flags a transaction for review or approves a payment, it is making a decision. If that decision is later found to be flawed, who is accountable? Is it the CFO who procured the system, the IT department that maintains it, the finance team that uses it, or the vendor who wrote the original code?

This ambiguity is common. The shift to automated financial processes has, in many organizations, created a significant accountability vacuum. Without a formal governance framework that assigns clear ownership for algorithmic processes, no one is ultimately responsible for their outcomes.

The Accountability Gap in Automated Finance

In traditional, manual workflows, accountability was relatively straightforward. It was tied to the individuals who performed specific actions—the clerk who prepared the payment, the manager who signed the check, the director who approved the expenditure.

In an automated system, the locus of decision-making is diffuse. The logic is designed by a vendor, configured by an IT team, and used by finance professionals. When a failure occurs, it is easy for each party to point to another as the source of the problem. This diffusion of responsibility means that, in practice, no single individual owns the automated judgments the system makes every day. This is an untenable position for any organization with fiduciary responsibilities.

A Governance Framework for Algorithmic Processes

The solution is to deliberately apply established governance principles to the domain of automated systems. Every critical, automated financial process must have a clearly designated owner.

A simple but effective tool for establishing these roles is a RACI matrix, which clarifies who is Responsible, Accountable, Consulted, and Informed for a given activity. Consider its application to a critical automated control, such as the system’s process for screening payments against a sanctions list:

• The Activity: Defining, testing, and confirming the correct configuration of the automated sanctions screening process.

• Accountable: The Chief Compliance Officer. This is the single individual who “owns” the process and is answerable for its success or failure.

• Responsible: The IT Systems Administrator. This is the “doer” who physically performs the technical configuration of the screening rules in the system.

• Consulted: The Head of Internal Audit and the Head of Payments. These stakeholders provide input and must be included in the decision-making loop.

• Informed: The CFO and relevant Program Directors. They are kept up-to-date on the status and performance of the control but are not active participants in its day-to-day management.

The Critical Role of the Business Process Owner

This framework makes it clear that for any automated financial function, there must be an Accountable owner from the business side (e.g., Finance, Compliance, or a Program Head), not from the IT department.

This individual is not expected to be the technical expert. However, they are responsible for defining the business rules the system must enforce, for signing off on the system’s configuration, and for accepting the risk associated with its operation. The IT department implements the control; the business owner owns the control. This distinction is the bedrock of sound technology governance.

Technology does not eliminate the need for human accountability; it demands a more explicit and deliberate form of it. Without a designated owner to receive and act upon findings, even the most advanced independent monitoring has limited impact. Clear governance is the organizational prerequisite for turning monitoring data into meaningful action and lasting assurance.