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Today, there is a significant change in using data cubes to communicate directly with bank IT and data. This modern reporting methodology significantly improves reporting for banks, as data has to be presented only once in the specified format.
FREMONT, CA: The ongoing crisis of COVID-19 significantly accelerated the need for financial institutions to implement disruptive technology. Indeed, during the lockdown, consumers had no alternative but to move to a digital-only environment.
Digital innovations are a crucial enabler for more powerful, more productive, and fewer volatile operations in the financial sector. However, this dependency on technology entails related risks—reputational, legal, and economic—have also increased dramatically. Before introducing innovative solutions, institutions must specifically express their risk appetite and then concentrate on mitigating the risk by fostering a culture of diligence and enforcement.
Financial entities that fail to handle technical risks acceptably may face substantial responsibilities, as technology-risk management's legal and regulatory requirements are becoming more stringent. Institutions would need to balance the advantages of technological developments with the complexities of risk management. Below are two primary components vital to achieving this equilibrium.
1. Create a New Risk Strategy and Culture
While integrating emerging technology into the company, financial companies need to define appropriate levels of risk, create a series of contingency steps, and incorporate all of these elements into a consistent transition in the story of mobilizing workers. When the aspiration has been expressed, it will be further cascaded and shared within the organization.
The potential effect can be illustrated by how technologies can streamline compliance with risk control. In the past, most regulators relied on paper-based or semi-electronic submissions to control bank appetite for risk. Today, there is a significant change in using data cubes to communicate directly with bank IT and data. This modern reporting methodology significantly improves reporting for banks, as data has to be presented only once in the specified format.
2. Ensure Focus, Knowledge and Support at Organizational and Board Level
For financial institutions to work much like technology firms involved in the financial sector, they would need to significantly expand their understanding of technology and its risks at the board level and around the company. In recent years, financial regulation has intensified its emphasis on the technical expertise and management of financial institutions, which will continue in the coming years.
From a strategic perspective, organizations can enrich and maintain their board's knowledge of technology and its related threats by increasingly regular coordination sessions, coupled with a boot camp program and more instruction. From a legal perspective, board members can face a heightened risk of liability if they fail to devote adequate time to managing emerging technology risks.
This shift of mindset at the board level must be followed by an adequate emphasis at the organizational level so that risk, regulatory, legal and infrastructure divisions can lead this transition through the company. Similarly, new insight and learning must be nurtured and assisted by far more inclusive approach to work. Improvements should not be guided by industry, enforced by IT and controlled by support functions. Instead, small cross-functional teams can be developed to produce end-to-end performance.