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The brave new world of risk digitisation

A little over three years ago, BBVA’s visionary chief executive, Francisco González, wrote a Financial Times op-ed which began: “Some bankers and analysts think that Google, Facebook, Amazon, or the like will not fully enter a highly regulated, low-margin business such as banking. I disagree. What is more, I think banks that are not prepared for such new competitors face certain death.”

At the time, the prediction ruffled some feathers, but in just a few short years, it has already come to pass, with those three companies, plus Apple and AliPay, making overtures in the world of finance and upending the status quo.

Leveraging their intimacy with their customers and their technical capacity, they are able to create systems from the ground up that integrate neatly into their customers’ daily lives and, importantly, face none of the legacy issues that 100+ year old banking institutions have to deal with.

Banks playing catch-up

But deal with legacy issues they must, if banks wish to survive the next 100 years – or even the next 10. Digital transformation is key, and the digitisation of risk is an exciting opportunity for lenders. McKinsey & Co. has found that by digitising these processes, costs can be cut by up to 90%.

Attractive though such savings are, digital transformation is a difficult and messy job, and even those firms and institutions that recognise the enormous potential available to them are sometimes dragging their heels because of a lack of resourcing, low stakeholder buy-in and the tenacity of traditions.

Top talent required…

My clients are looking for people across all levels and the different disciplines of risk management with experience of the digitalisation of risk processes. Ideally candidates will be well-versed in one or more of the key regulatory requirements for digital risk (CCAR, BCBS 239, FRTB).

On top of this highly specialised skillset, they want candidates who have both the technical skills including advanced analytics, data science and data transformation, robotics and machine learning, and the essential soft skills such as innovative thinking, stakeholder engagement, communication and change management.

Additionally, since every institution will be slightly different, and the technologies affecting regulations are always changing, decision-makers must constantly be looking to the future, and finding ways to expand on the knowledge and skills within their businesses.

…But competition is fierce

When I speak to these top professionals, they are looking for roles in innovative environments with modern management styles and less hierarchical structures, where they can use their skills to bring true value and lasting benefits to their organisation.

It’s not enough for banks to simply offer competitive remuneration – although that’s also essential. They must also create an employer value proposition that will stand up next to those of tech firms; they are no longer just competing with other financial institutions for talent, but also with the glamour of Silicon Valley.

Proactive innovation creates rewards

González didn’t just talk the talk of competing with tech. As far back as 2007, BBVA was implementing transformation programs to take advantage of the opportunities offered by online banking, and to future-proof its operations. It now offers one of the most advanced risk functions in the global market, and the results speak for themselves. Other banks setting the standard in this arena include ABN AMRO and ING.

While it can be harder for old institutions with long histories to move in this agile manner, it’s becoming more and more critical, and the risk function sits at the very heart of this digital transformation.

If digital transformation in risk is top of mind in 2017, contact us.

Peter Umesi

Director, Head of Risk Analytics, EMEA

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