Today’s world of operational risk for banks is much different from what it was two years ago. More complex. More volatile. And moving faster, according to our global risk research. In fact, 77% of risk leaders we surveyed believe that complex, interconnected new risks are emerging more rapidly than ever before. Yet fewer than a third are very satisfied with their progress to identify those new risks.
In conversations I was having before the pandemic hit, banks were already struggling with technology, climate change and geopolitical tensions. Add to this dynamic customer expectations, changing regulations and aggressive new competitors and one thing becomes clear: Banks are under pressure to create financial and operational resilience against an increasingly unpredictable array of shocks and risks.
I believe that one of the things that is stopping banks from improving operational maturity is that they don’t know the ultimate goal, they’ve not set it out and they tend to take an incremental approach to improving operations, versus a holistic view.
Banks need operations that are digital, driven by data and intelligence to deal with the threats of tomorrow. When they do, our future-ready banking research shows they not only become more resilient but also, on average, have market valuations 27% higher than less digitized peers.
We found that forward-thinking banks are focusing on three things to ensure their operations are ready to face any risk.
Think big, AI enabled and in the cloud
In our research, less than half of banks’ risk teams expanded the range of new and emerging threats they evaluate in stress testing. Prepared organizations think broadly to include everything from cyber risks, which have increased with remote work, to climate change and even customer expectations for seamless, 24/7 banking.
Similarly, to anticipate and prepare for these expanding threats, organizations are adding new technologies like cloud, robotic process automation and artificial intelligence (AI) to automate basic processes such as controls testing or reporting. For example, AI can be used to index, assess and disseminate new regulatory requirements while analytics can help unearth compliance bottlenecks.
Bank of America created myCTO, which uses automation, AI and machine learning to monitor, identify and address client issues before they become problems.
Engage the right team
Our global risk research finds that technology-equipped and highly skilled risk teams allow their organizations to identify and navigate threats earlier and more effectively. Yet risk teams trail behind the rest of the organization when it comes to adopting new technology. And they often don’t have the expertise or bandwidth in-house to use it. Leading organizations are gaining both through external partners while expanding career paths for their own teams.
Continuous readiness
For 71%, COVID-19 exposed deficiencies in their ability to respond to crises. Being prepared starts by having an effective contingency plan and digital operations to respond quickly. When COVID hit, very few global banks with local branches knew how to quickly move customers to online services and ATMs, and use work shift changes to ensure customers and employees had seamless, continuous banking with minimal virus exposure.
What’s more, intelligent operations (grounded in innovative technologies to push the boundaries of today’s processes and business models) helps identify and manage threats while also allowing banks to respond to dynamic business demands. A global financial institution reconsidered its entire technology architecture – full of legacy systems – to make it digital and can now test, learn and adapt to get new products to more markets faster.
With fresh thinking and the right combination of expertise and technology, today’s banks can build the digital operations they need to navigate complex risk and thrive.
Take the Next Steps
To evaluate your own operations maturity, take the Future-Ready Operations Maturity Assessment. Answering 10 questions provides you with a report you can use to better understand how to tackle compressed transformation challenges by building an intelligent operation.
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