The Future of Bank Risk & Compliance Management

Risk and compliance management are both dynamic domains that evolve over time. Risk and compliance are affected by a changing business landscape, the economy, customer demands, corporate vision, and much more. Information technology has been the driving force behind most of the changes we observed in banking. The 2008 financial crisis was another major force of change, as it resulted in the banking industry reevaluating the way it handled risks because of the way the financial crisis exposed weaknesses and blind spots.

Looking at the current trends in banking and finance can help banks understand the changes that will affect them over the next decade. These trends are important because they tell banks how to prepare their risk and compliance management infrastructure to be future proof.

Increasingly demanding regulatory requirements

Government tolerance for bank failures has decreased since the 2008 global financial crisis, and the appetite for interventions that use taxpayers’ money to save banks has been reduced. Regulatory bodies are now monitoring suspicious behavior more vigorously, with many planning to use advanced tools and technology to enable better audits.

Banks will have to rise to the challenge by building a robust regulatory compliance framework that allows them to quickly detect non-compliance and monitor risks. This can be accomplished with compliance management solutions that offer continuous monitoring along with streamlined compliance workflows.

Changes in customer expectations

Changes in customer expectations will cause radical changes in the profile of the banking sector. The widespread use of technology will be the norm for customers when interacting with their banks. The current generation of young people in the digital age will be the largest contributor of revenue to banks at the age of 40.

Customers love digital banking services because they allow them to access their accounts and perform necessary transactions at any time of the day without needing to go to a bank. Digital banking is a win-win situation for banks and customers – banks benefit because they can deliver services to customers without increasing headcount and other related expenses. Banks can entertain more customers without needing to open more physical branches and hiring more employees.

Data analytics for risk management

Technology will also allow for new risk management techniques, often associated with big data analysis. The proliferation of new technologies provides faster and more economical processing and storage capabilities, which allows for better support in risk-taking and process integration. We have already experienced the effects of technologies whose implications are important for risk management, such as big data and artificial intelligence. Artificial intelligence is what powers Predict360, our American Bankers Association endorsed a compliance management system.

As banks use more technology to manage risks and compliance, it also results in more risk and compliance data being produced. This data can help banks anticipate risks and detect emerging risks faster. Another important benefit of risk and compliance technology is that it gives banks access to real-time risk and compliance data. There is no need to manually collect information to create reports. Real-time metrics can instead be displayed on dashboards, enabling better decision making at the executive level.

A constant need for cost reduction

Banks have adopted advanced operational efficiency techniques to increase profitability. Banks have always been an essential part of our lives – we need banks to receive our wages, to manage our finances, to get loans, and many other banking services. This allowed banks to develop multiple revenue streams and the banking sector had no competition in these streams. Over the past two decades we have seen the rise of born-digital payment platforms and other financial services that threaten to take away some of the market shares from banks.

In the future, banks will have to rethink their operating costs to enable the delivery of more value at a lower cost. Simplification, standardization, and digitization will prove to be viable avenues for substantial cost savings. Using risk and compliance technology allows banks to deliver better compliance and risk levels while reducing costs for managing both. This is accomplished through an exponential increase in productivity powered by technology which allows the same number of employees to deliver significantly more value to the organization.

Creating a future-forward risk and compliance management framework

Banks that are planning to invest in risk and compliance technology need to make sure that the technology they choose will be able to stand the test of time. Cloud risk and compliance technology solutions have a unique advantage in this situation. When a business implements a technology, they are usually stuck with that technology and must pay to get access to its newer, updated versions. This, however, does not apply to cloud solutions.

Since cloud solutions are being managed by the provider and the customer is paying for access to the solution, these solutions are updated at the end of the provider. Our Predict360 solution, for example, is continuously being updated based on new market requirements and regulatory updates. Our customers never have to worry about having outdated tools or technology.

Wondering how your bank can improve the way it manages risk and compliance? Get in touch with our experts for a demonstration of what our technology can do for your organization.