More than ever, banks are compelled to be highly customer centric if they wish to succeed. But being customer centric is a relatively new challenge for banks—one that opens the door to new customer risks and new operational risks.
Operational risk is an up and coming concern among banking risk executives. The 2015 Accenture Global Risk Management study shines a light on this new challenge, showing how a customer-centric digital business model opens these risks: cyber security, data privacy, reputational and social media.
Imagine, for example, a bank that decides to proactively connect with customers and prospects using Twitter. Suddenly, data privacy concerns extend beyond traditional banking vehicles. The bank’s reputation is at risk—one negative tweet can go viral in a nanosecond.
Risk executives in banking are well aware of this challenge. Our banking-specific infographic shows 65 percent of the banking risk executives responding to our survey expect cyber risk to become more severe. Some 61 percent predict a rise in fraud and financial crime. Another 59 percent see strategic risks on the rise. And 55 percent anticipate the risk of market disruption from new technologies to become more severe.
My last post talked about balance, and the challenges risk executives face in terms of helping the business grow and move toward a more customer-centric model while balancing that with protecting the business, ensuring compliance and managing risk. Operational risk is where this need for balance becomes crystal clear. Digital, data-driven approaches to customer centricity rely on a business model that is full of new risks for banks—but also chock full of growth opportunities.
In fact, for many banks, managing operational risk to drive growth won’t be a luxury so much as a matter of survival.
Some of the steps banks must consider taking to manage operational risk include:
- Overhauling IT platforms that were designed for a branch-based bank
- Building responsive tools for instantly assessing credit risk
- Creating a risk management approach that can flex as new digital approaches to customer interaction emerge
- Supporting real-time data processing
That’s just the beginning. As our banking report shows, some banks have taken these steps and even moved beyond them. Some already have enabled real-time data processing, others have replaced legacy IT systems and still others are moving toward open IT architectures that let the banks team with third-party providers.
Banking risk executives should be acting holistically as they address the dual challenge of helping banks increase customer centricity while also helping them manage all the inherent risks. This isn’t a time to reinforce the siloes—it’s time to break those outmoded ways of thinking, which risk management, in this case, is uniquely positioned to do.
For more on banks and operational risk, read our Global Risk Management Banking Report.