After a spate of industry failures this spring raised questions about the state of financial institutions’ operational resilience, banks are stepping up the pace of deploying technology that provides a holistic view of risk.
Rising interest rates, recent turmoil in the banking industry, Potential regulatory change Ian Watson, head of the global risk practice at consulting and analytics firm Celent, said banks are urging them to become more willing to develop an enterprise-level view of enterprise-wide risk.
“I think all the bankruptcy and run-on activity has created an opportunity to be more agile in responding to new threats,” Watson said. “So instead of focusing on reducing the amount of risks and threats that arise, banks are investing in technologies such as automation and cloud platforms that make them more responsive to threats and risks as they arise.”
The firm, which offers governance and compliance risk technology, said it saw increased demand from financial institutions last year and that trend has accelerated since March.
Gaurav Kapoor, CEO and co-founder of MetricStream, said he sees proactive efforts to integrate teams across banks so that risk is not siled in any part of the financial institution. MetricStream provides banks with a platform to monitor governance and compliance risks such as third-party controls and regulatory changes.
“Risk isn’t just the top 200 people in the bank looking at risk,” Kapoor said. ‘Risk should be considered’ [by all employees of a bank]. They all have a view of where the risks lurk. So the ability to actually interact with the field and understand risk is a big moment for me in banking. “
One of the key features of the cloud is the ability to pool large amounts of data in a convenient way. Watson said there is a growing appetite for cloud technology from banks looking for better ways to manage data.
Mena Raishi, managing director of inter-American banking solutions at Moody’s Analytics, said connecting different parts of a bank could also be a means of managing expenses.she said Hot competition for deposits There is increasing pressure to gain market share and improve efficiency.
“Previously, there was more independence between the front office, middle office and back office,” Raissi said. “Our customers are starting to think more about integrated end-to-end. They want technology that helps them build a common language across their organization, ensuring that they connect with stakeholders in the lender and underwriting departments, as well as the back office lenders who actually manage their portfolios.”
Almost all financial institutions increase technology budget By 2023, it will increase by more than 10%, according to Arigent data based on a survey last October. Banks and credit unions said their main technology priorities are data and analytics and cybersecurity.
Tracy Moore, director of Americas strategy at Fenergo, also said banks began to look more closely at compliance and risk technology about a year ago, but the crisis in March added momentum. Fenergo provides banks with cloud-native and automated compliance services, and recently added continuous transaction monitoring for its customers.
Riskonnect CEO Jim Wetekamp said he sees banks seeking greater breadth and depth of risk management technology, including increased agility to respond to changes in customer segments and business lines, and third-party monitoring systems. We are following recent regulatory guidance.
In March, Ronak Doshi, a partner focused on digital transformation and banking at Everest Group, said in an interview: Banks are expected to grow Reduced annual risk technology budget by 8% to 12% with a focus on real-time monitoring of data, artificial intelligence and machine learning capabilities.
Artificial intelligence, the hottest topic in the technology space, is driving the development of risk management. Building a more consistent view of data will improve the capabilities of artificial intelligence systems, Watson said.
According to last year’s Arigent survey, only about 12% of regional and regional banks and credit unions cite artificial intelligence as one of their top technologies for 2023, compared to about 36% of the World Bank and national banks.
Kapoor said MetricStream has nearly tripled their investment in AI. Moody’s recently announced a partnership with Microsoft to offer generative AI solutions built on Azure OpenAI services. For example, a new tool called Moody’s Research Assistant can compile and summarize information from multiple data sources for banking, capital markets and insurance clients.
Watson said there is a continuing shift from rule-based AI, where humans design the rules, to machine learning AI, especially in the areas of cybersecurity and fraud. Google Cloud last month unveiled an anti-money laundering product powered by machine-learning-based AI, which Watson called “a product like no other.” A study by HSBC found that the product helped him identify two to four times more suspicious activity while reducing alerts by more than 60%.
“I think the step towards generative AI is real,” Watson said. “This is not just hype. We are seeing Amazon, Google, and Microsoft creating platforms that allow banks to benefit from large language models while still using their data in isolation.”
