A Multi-objective Rule Optimizer with an Application to Risk Management

Managing risk is important to any E-commerce merchant. Various machine learning (ML) models combined with a rule set as the decision layer is a common practice to manage the risks. Unlike the ML models that can be automatically refreshed periodically based on new risk patterns, rules are generally static and rely on manual updates. To tackle that, this paper presents a data-driven and automated rule optimization method that generates multiple Pareto-optimal rule sets representing different trade-offs between business objectives. This enables business owners to make informed decisions when choosing between optimized rule sets for changing business needs and risks. Furthermore, manual work in rule management is greatly reduced. For scalability this method leverages Apache Spark and runs either on a single host or in a distributed environment in the cloud. This allows us to perform the optimization in a distributed fashion using millions of transactions, hundreds of variables and hundreds of rules during the training. The proposed method is general but we used it for optimizing real-world E-commerce (Amazon) risk rule sets. It could also be used in other fields such as finance and medicine.