Banking Institutions and Financial Sector are on the urge of digital transformation. The increasing use of technologies lead to increased risk. With the digitization, the various sources of risks are bank's website, mobile trading applications, corporate banking platform and so on.
The pace and magnitude of adoption of digital technologies in banking processes compel the corresponding authority to look upon the risks management. Automation in banking process not only changed the risks profiles but also generate large amount of data that can be useful in designing risks management strategy.
Digitization has offered many benefits in terms of ease of operation, convenience, reduced waiting time to the customer and reduced costs and increased revenue to the organization. But at the same time, Digital channels open up many business and operational risks.
Various risks associated are:
The biggest challenge of getting online or using digital technology is data security. The risk of ransomware attacks is growing. The result of data breaches or leakages results in financial and reputations loss to the company.it leads to tremendous impact on business operations and trust of public. In banking sector, trust of people is the foundation for survival and growth of business.
Trade-Based Money Laundering
One of the growing challenge for banks are trade-based money laundering and terror funding through banking operations. Banks need to build a digital system that can recognize illicit money flow at rights time and track every suspicious transaction.
With the help of digitization bank can develop systematic trade system to ensure high quality work flow and risk-free transactions and also meet all regulatory compliance.
With the increasing used of digital banking the interaction point of customers has increased. It opens up many digital channels. The different digital channels create different risks and can cause fraudulent transactions, risks in digital payment system etc.
The changing scenario of business operation in banking industry has changed the risk appetite. The organization need to develop innovative strategies and use new methodologies to manage risks. Banking institutions can use these approaches to manage their risks.
Data driven risks Management Strategy
Use of digital technology provide greater access to the risks related information. So, banks can make intelligent use of collected data and improve its data driven innovative risks management strategies. The data driven strategies provide banks with proactive solutions rather than reactive responses.
Centralized Risks Data Services
The traditional methods of risks management have lack of real time insights. A centralized system of data services facilitate data based on real time and discover patterns and valuable insights for risk related decision making. Now banks are looking for integrated technologies that can ensure regulatory compliance, risks management and internal audit.
So, in the coming year banks have to develop a system with in time flow of information, process standardization, dynamic collaboration.