By Alice Kelly, Head of Research, CeFPro.
The financial services industry and specifically financial risk management is inundated with advances in technology and innovation driving efficiency and automation of practices. Industry discussions are increasingly centred around technological advances and how these can be leveraged for competitive advantage and driving efficiencies across the institution. In such a cutting-edge landscape and rapidly evolving times, the future of risk and particularly how risk is managed is little understood and heavily debated. It is more important than ever for institutions to become more agile and susceptible to change, and adaptable to new techniques and advances to stay ahead of competition. Many are looking towards the future and how the landscape is evolving with every passing day, institutions must look to incorporate change into future strategy and utilise technology advances to enhance risk management practices and leverage the opportunities available to keep up.
Ahead of the highly anticipated 7th Annual Risk Americas convention, the Center for Financial Professionals researched with over 50 industry professionals to shape the 2-day, 4 stream agenda. One of the key trends prevalent throughout this research was that of innovation, from both a technology and more traditional process management perspective. Institutions are faced with increased pressure and opportunity with a whole industry opening up around them.
Many are unsure of what the future holds for the financial services industry but for the purposes of this article, risk management in particular. Whilst some embrace the change, others ponder on the future of robotics and disruptions to their day to day role, or even to the necessity of their role in the future. For now, we review leveraging technology as a strategic opportunity to drive business and better manage risk, technology is continually opening doors for innovation in best practice and driving consumer benefits. With such rapid evolution and strategic change comes increased risk, institutions must begin to incorporate technology advances and their risk considerations into long term strategic planning. Alongside long-term planning and aligned to the infinite benefits of technology is that of efficiency, in a climate where many departments are expected to achieve far more with far less, technology could provide opportunities to align these goals both internally and externally. The potential use cases for the range of technology opportunities and innovations have the potential to transform the industry. As consumers, customer facing apps were once an unknown or unimaginable device, now they are a basic product offering most have become accustomed to. Innovation has brought the industry to new heights, few could imagine and continues to push back office management even further as they continue to develop new practices and increase efficiency to drive that out, and ultimately protect customers and improve their experience.
With customer protection and experience in mind, the future of technology and the vital element to successful digital transformation lies with them. With the advances in technology that can be leveraged as opportunity, comes technology and advances that can become detrimental to information security and ultimately customer protection and loyalty. It is more important than ever for institutions to improve their cybersecurity programs and look further afield to vendors and third parties to protect customers sensitive information from increasing attacks. For larger institutions protecting customers is a complex process, opening a competitive disadvantage for smaller, more nimble players to enter the market. Many institutions rely on legacy systems that are near impossible to unwind, entangled in multiple layers within extremely complex organisations, requiring more complex threat exercises and information security programs and penetration tests to protect their institution. It is the complexity of these institutions that lead many to question the future of the industry and the impact of technology as a disruptor with start-ups entering the market with capabilities and adaptability to change. What does the future hold for banking, and more specifically risk management as the industry continues to advance beyond recognition?
Finally, alongside incorporating within strategy, leveraging opportunities and driving efficiencies within institutions, ultimately it comes down to customers and competition – “how can we leverage technology to gain competitive advantage?” is the question across the industry. Innovation has the potential to transform individual’s jobs, an institution and the industry combined, and everyone must keep up. The competitive landscape is fiercer than it has ever been with whole innovation departments at many institutions. Others establishing incubation hubs to leverage the adaptability and ingenuity of start-ups or FinTechs, to combine the legacy of a well-established institution, with the adaptability of a technology start-up.
Technology and innovation are causing ripples across the industry, disrupting traditional thinking and transforming the future of risk management. Institutions should harness change and leverage the opportunity to adapt to the new technological landscape, providing the opportunity to minimize expenditure and maximize efficiency to boost profitability, albeit having to potentially depart from some more traditional habits. Flexibility and agility are key, incorporating long term change into strategic planning and embracing change and innovation as an opportunity far beyond the limitations of today and current technology.