BUSINESS RULES ENGINE

Frequently Asked Questions

An introduction to business rules engines

Use Cases for Business Rules Engines

BREs are best used for upholding company policies, business strategies, and industry regulations in operational decision-making within automated systems. Here are some common industry-specific use cases:

• Insurance: Use cases include quoting, underwriting, and claims processing.
• Banking or financial services: Use cases include KYC and AML, fraud detection, and loan origination.
• eCommerce: Use cases include dynamic pricing, personalization, and product recommendation.
• Healthcare: Use cases include health risk assessment, benefit eligibility, and device monitoring.
• Retail: Use cases include invoicing, logistics, and merchandising.
• Manufacturing: Use case include product configuration, pricing, and inventory management.

How does a Business Rules Engine Work?

Let’s look at a common use case for a business rules engine: reviewing a bank loan application. Prior to digital banking, an applicant would typically have to visit a physical branch. The applicant would come prepared with a completed paper application and support documents (ex. pay stub). A relationship manager or loan officer would interview the applicant, package the applicant’s information, and send it to an underwriter. The underwriter would review the information, assess eligibility and risks, and make the loan decision based on the bank’s policies.

Data and Systems Integration

With technology such as a loan origination system (LOS), much of this process is now automated. In addition, a BRE is often used to replicate the decision-making the underwriter goes through when assessing eligibility and risks. In order to do so, the BRE would need to be connected to both input and output sources. Input sources are typically data sources such as an internal database, internal systems, and 3rd-party data sources. In this example, data sources may include an LOS and a credit bureau (for pulling credit reports). Input sources provide the context for decision-making. Output sources are typically internal systems such as the LOS or a CRM. They are usually where the decisions are acted out.

Capturing Knowledge and Policies as Business Rules

Next, the bank’s policies and underwriter’s knowledge would be codified into business rules understable by machines. For example, a business rule related to eligibility might be IF the applicant is under 18 years old, THEN decline the application because the applicant is under age. Note, the actual syntax of the business rules will depend on the language used and how data is stored in the organization. For example, age is dynamic and therefore usually calculated in real-time by using the applicant’s date of birth and the current date. Therefore, the business rule may look more like IF (current_date – dob)/365 < 18, THEN… 

Executing Rules on Input Data

Once the BRE receives input data, it will pick the applicable business rules and run them on the input data. The BRE will then send the decision outcome to the relevant systems to perform the appropriate corresponding action(s). For example, the BRE receives applicant data and runs the eligibility rules. The outcome is the following: application_status = declined; decline_reason = underage. This outcome is sent to the LOS or CRM and triggers an email or letter to the applicant explaining the application was declined because they are underage. How the BRE runs the rules affects computing power or how efficiently the BRE takes to produce a decision outcome. In general, rules can be executed sequentially or through inference, the latter popularized by the Rete algorithm. Since there are certain situations where one method is better than the other, modern decision engines like SMARTS™ supports both (and then some).

What are Core Components of a Business Rules Engine?

BREs will vary based on definition and vendor. However, common components include the following:

Rule Authoring

BREs offer a tool or multiple tools through an interface for business analysts and other domain experts to write business rules.

Rule Storage

Business rules are stored in a central repository or database that can be managed by the BRE.

Rule Execution

In production, BREs will receive input data, retrieve relevant business rules from the repository, and run them against the data. The outcomes of the business rules are then sent to the appropriate systems to trigger corresponding actions.

Monitoring

Most BREs log events and provide monitoring and auditing tools. This ensures that business rules are behaving as expected and makes it easier to troubleshoot when issues arise. Tools can include reports and alerts.

Versioning

Business rules often change over time in response to new business objectives and requirements. This is why many BREs support versioning to make it easier for organizations to manage different versions of business rules, reverting back to older versions when necessary.

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When Does it Make Sense to Use a Business Rules Engine?

Using a BRE makes sense in various situations where an organization needs more flexibility, agility, and transparency in managing the underlying logic behind an automated task.

Frequent Rule Changes and Dynamic Business Environments

Organizations can benefit from using a BRE when the business rules change frequently, usually due to evolving regulations, market conditions, or internal policies. Rather than needing to modify the application code and go through the whole software development lifecycle, users can quickly update and deploy rules without messing with the whole system. Startups and businesses launching a new product can especially take advantage of BREs to accelerate prototyping and development.

Complex Decision-Making

Organizations can also benefit from using a BRE when automated decision-making processes involve a large number of rules, multiple conditions, and complicated calculations. Rather than putting the onus on software developers to code and maintain the decision logic, BREs allow the subject matter experts to manage and execute the rules.

Regulatory Compliance

Industries that are subject to regulatory changes such as financial services, insurance, and healthcare can also benefit from using a BRE. It provides the transparency and tools to quickly identify what changes need to be made where in order to comply to new regulations.

Multiple Lines of Business or Systems

In organizations with multiple lines of business or multiple systems that need to share certain business rules, a BRE can serve as a central hub for those rules. This will avoid unnecessary redundancies, inconsistencies, and errors.

What are the Advantages of Business Rules Engines?

BREs offer several advantages, especially for operational decisions, daily decisions that occur in high frequency and volume and are likely to change over time.

Isolation of Business Logic

First, BREs enable organizations to isolate business rules from the applications, systems, and processes that use them. This allows business analysts and domain experts to mange the rules independently, in a centralized location.

Separate Lifecycle

Because business rules are treated as a separate asset, business rules management can operate on its own lifecycle. Users can make updates when necessary rather than waiting on prioritization in the developer queue and going through the standard software development lifecycle. Therefore, organizations can adapt to new market opportunities and regulatory changes faster. This also allows organizations to experiment faster and more frequently.

Consistency, Scalability, and Ease of Maintenance

A centralized rule repository enforces consistency across the systems that use the rules, makes it easy to apply existing rules to new systems, and simplifies maintenance.

Cost-Efficiency

As non-technical users can define, modify, and manage rules, an organization can reduce IT and development costs that would be been necessary to code, implement, and maintain business logic.

Transparency

As most BREs provide logging, organizations can monitor and audit rule execution for compliance and further analysis.

Are Business Rules Engines Obsolete?

No, business rules engines continue to be relevant and widely used in various industries to manage and execute business rules efficiently. However, the technology landscape continues to evolve. In general, rules engines are becoming more low-code and no-code and incorporating AI and machine learning. Also, there seems to be an convergence of technologies. Process and workflow automation tools are offering more rules management capabilities. Conversely, rules engines are offering more process and workflow capabilities. 

How do You Build a Business Rules Engine?

Building a BRE involves multiple tasks and cross-functional teamwork. If your organization choose to go down that path, you may want to leverage open-source technologies to speed up development and reduce costs. Here’s a high-level overview of steps involved:

1) Define Requirements

Understand how the business rules fit into your overall business, what types of rules you need to support, and where the BRE needs to integrate with other systems.

2) Choose a Development Language

Decide on the programming language that fits your needs. Common languages include Java, C#, and Python.

3) Design the Data Model

Create the data model that will be used to generate and execute rules. You may also need to include metadata for managing rules.

4) Design the Rule Authoring Interface

Develop a rule authoring interface. Ideally this should be user-friendly such as including graphical tools and natural language processing.

5) Create Rule Storage

Implement a mechanism to store rules. Consider how you’ll handle versioning and deployment.

6) Develop Rule Execution Engine

Design the engine that will retrieve and execute rules. Consider scalability and performance. Depending on your requirements, you may implement forward chaining, backward chaining, or a hybrid approach.

7) Build Integrations

Build the necessary APIs, connectors, or plugins to integrate the BRE to other systems.

8) Develop Testing and Debugging Tools

Build tools for testing and monitoring tools such as simulations and rule tracing.

9) Implement Security Measures

Apply necessary access controls, encryption, and other security practices.

10) Documentation and User Training

Provide comprehensive documentation and training for developers, administrators, and users.

11) Continous Improvement

Regularly update and improve your BRE based on user feedback.

What are the Best Business Rules Engines?

It depends on the specific requirements, budget, and available resources of your organization. For some, it might makes sense to build your own rules engine. In this case, there are several open-source frameworks that can be used. For others, a specific application may suffice such as a LOS. These applications tend to focus on process and workflows but will have some business rules capabilities. However, if your organization is lacking internal resources to build a rules engine from scratch and would like more customization than what pre-built applications offer, then consider SMARTS™ as your business rules engine. Join global leaders in financial services, insurance, healthcare, retail, utilities, and IoT that use SMARTS™ to manage complex operational decisions daily. 

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