In my last post, we talked about the burning platform facing banks in North America: digital disruption.
New competitors are crafting digital business models that disrupt traditional banking, at a time when banks in North America are hesitant about increasing their digital risk appetite.
But for banks that do have an appetite for digital disruption, the potential for sustainable growth is significant. Banks that can develop a customer-facing, omni-channel approach and ensure strong support from risk management are well positioned for profitable growth.
Note the role of risk management in driving growth from digital. Accenture’s 2015 Global Risk Management Study: North American Banking Report highlights how risk management and digital disruption work together. For example:
- The risk function is stronger when it leverages digital. With the right tools, digital can provide real-time data that supports rapid, effective risk decision making. Analytics can help model scenarios, predict potential losses and evaluate portfolios.
- When staffed with the right talent, the risk function can anticipate risks inherent in new digital processes or business plans, helping the business effectively manage its exposure.
- Risk management can build a solid understanding of various digital customer interfaces and assess/evaluate opportunities for a bank to proceed with a digital approach—strategically guiding the business forward.
Together, risk management and digital disruption have the potential to bring out the best in each other, ultimately benefiting the bank by guiding it safely forward in today’s digital world.
But to get there, the risk function will need to transform. As our report notes, risk functions in US and Canadian banks have moved from their traditional role to one that also embraces reputational risk. That’s stage one of the journey. Next, the risk function will need to broaden further, becoming more strategic and forward looking, building the skills to help identify and manage risks inherent in today’s—and tomorrow’s—digital technologies.
Banks are easing their way toward building this kind of risk function. Some 44 percent of those interviewed for our report say their risk function already is contributing significantly to the bank’s long-term growth. More than 70 percent say risk is contributing to product development and innovation—at least to some extent.
Banks and their risk functions are stepping in the right direction. See the Accenture report for more on banks and risk management in North America.