Banks and other financial services firms have come a long way from the depths of the 2009 financial downturn. Earnings reports have been strong and many of the U.S. banks passed their most recent stress tests with relative ease.
But there are new challenges and opportunities on the immediate horizon, often fueled by the race towards embracing digital. As new competitors arise and customer expectations becomes more demanding banks’ boards and senior managements need to rapidly adapt the way the bank operates and interacts with customers if the bank is to remain relevant. And, in the process of the evolution, there is an important role for finance and risk teams to actively work with the business units to ensure that they can operate effectively and with appropriate controls in a more digital world, with significantly increased access points to customers and other third parties. It is also critical that the teams adapt their capabilities to leverage the power of the new tools and make effective use of the potential of analytics to target the right opportunities and profitability.
However, before Finance and Risk leaders can take on the roles of leading on broader roles across their own organizations, they first need to ensure that their functions have made their own pivot to adopting to digital ways of working. Both functions are well positioned to be early adopters and leaders in the move towards digitization of the bank.
To take advantage of the opportunities presented by digital technologies (and to keep up with the rapidly increasing pace of digitization) finance and risk should be investing in three key areas:
1. Automation. Powerful tools such as robotic process automation (RPA) are now available to take over repetitive tasks and free up people to focus on areas requiring insight and judgment. By using desktop automation, RPA and other technologies, firms can increase consistency and process discipline, lowering costs, freeing up talent and share of mind and thereby augmenting the capabilities of the finance and risk teams. Automation also generates streams of high-quality data that support investment in another key area, data and analytics.
2. Data and analytics. Financial services firms have ever increasing access to vast quantities of high-quality data from multiple disparate sources. This may be generated internally by automation tools and better access to data from business units, or externally through the capture of economic trends, market information and client data. New technologies such as data lakes help organize the data and make it readily accessible, while analytics help the finance and risk teams be better informed and better able to make the right decisions.
3. Artificial intelligence. Analytics puts the data to work creating algorithms, but artificial intelligence (AI) in the form of machine learning and other technologies helps computers recognize patterns and do so quickly and tirelessly. When combined with human talent, machines can be taught to generate output and then to make continuous adjustments and improvements.
Banks that get the digitization of finance and risk right will not only have an advantage in controlling costs, they will have access to consistent, accurate flows of information that make it possible, for example, to serve new market segments with greater certainty and lower risk. Most of all, they will have the advantage of finance and risk teams that are liberated from mundane, repetitive tasks and given the freedom to focus on areas with high potential for future growth.