business activity monitoring (BAM)

Business activity monitoring (BAM), also called business activity management, is the use of technology to proactively define and analyze critical opportunities and risks in an enterprise to maximize profitability and optimize efficiency. The BAM paradigm can be used to evaluate external as well as internal factors.

Three main steps compose effective implementation of BAM. First, relevant data is gathered in an efficient and timely manner and in sufficient quantities to provide meaningful results. Second, the data is processed to identify and categorize factors relevant to specific concerns. Finally, the data is analyzed and the results displayed in a clear, user-friendly interface so personnel can take appropriate actions.

An example of the use of BAM in risk management is the monitoring of credit card transactions to prevent fraud. If a large cash advance is charged to a credit card uncharacteristic of the normal behavior of the credit card holder, a bank security officer can call that person on the telephone and verify that the transaction was intended. Another example of suspicious behavior is the repeated withdrawal of cash at or near the allowable maximum from an automated teller machine (ATM) at frequent intervals.

BAM can be used to forecast events such as interest rates, stock prices, fuel prices and even the outcomes of political elections and to determine how specific changes might affect the way an enterprise should be managed. For example, the prospect of an angry public electing legislators who favor price controls might motivate energy suppliers to keep retail prices down in the short term.

This was last updated in October 2006

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