Bon appetit: banks get their risk appetite right

DXC Technology is a Business Reporter client.

Banking is a risky business. Financial institutions are selling trust, something difficult to earn and, once lost, very difficult to regain. Consider, for example, the fraudulent accounts scandal at a major West Coast bank, which is still trying to rebuild trust years after the transgression occurred.

To avoid discredit, unexpected sanctions, and personal risk for executives responsible for misconduct in their responsibilities, banks incorporate risk appetite (the amount and type of risk they are willing to take to meet strategic objectives) into their plans. . data metabolism, with increased alertness to ensure reliable results in the regulated environments in which they operate. Your data strategy must be robust, rigorously tested, and vigorously challenged in technical and architectural review processes, demonstrating the business value of an objective: increasing hyper-personalization initiatives, driving end-to-end automation or cross-selling services, for example. example. Review processes are also not a one-time effort, but rather occur from idea inception to implementation, and then progress continuously.

One problem, however, is that banks' risk appetite, determined largely by their sophisticated processes and data strategies, has often prevented them from adopting cutting-edge technologies. For example, many of them have been slow to adopt Cloud Computingopen banking and blockchain technology.

Manage trust and reduce risk with IT services partners

In an increasingly digital world, where not only fintechs but also non-bank financial institutions are new competitors, many traditional banks would benefit from support to ensure they can fully exploit and maximize new technology-driven opportunities. , while unconditionally complying with industry audits. rules and regulations. The consequences of not doing so can be devastating: remember that 11 financial entities using applications like WhatsApp and iMessage were fined more than $2.5 billion for violating recordkeeping laws by failing to maintain and preserve electronic communications.

An IT service provider with experience in the banking industry can be a valuable partner in managing trust and reducing risk for financial institutions. DXC Technology is one of those providers. Our extensive knowledge of the role of technology in creating business value in the industry can be invaluable.

Take the example of a bank that may not be sure whether it makes more sense to simply upgrade an old on-premise data warehouse, even if it means losing a strategic play by not adopting new technologies; or instead do a lift and shift, which provides the benefits of a cloud consumption model but retains the clunky database; or, finally, undertaking a top-to-bottom technology upgrade as part of a move to the cloud. DXC can leverage its vetted relationships with companies like Snowflake, which provides a scalable and flexible data warehouse solution built on a cloud-native architecture, and Databricks, which provides an open cloud-enabled analytics platform, to implement operational frameworks. tested for wholesale sale. Technological update in the cloud. As part of this, DXC would provide a cost risk appetite breakdown relative to the value of upgrading cloud technology, assume the risk of moving to a new application and platform (from design phase to construction and subsequent implementations). ) and provide support and training to bank administrators who will manage the solution over the long term, as well as warranty and maintenance as necessary.

Determine the risk appetite for emerging technologies

It is equally important for a service provider to support a financial institution by considering the risk of applying truly emerging technology against its likely benefits, conducting a thorough data-driven review to determine if there is a positive return from implementation, and managing change functions. . incorporate any newly introduced program processes into the bank's operating model.

Consider how DXC could help a bank make smart decisions when it comes to exploiting the acceleration of generative AI technology. We have reached the point of convergence between mature analytical skills, specialized hardware platforms, neural networks and new types of algorithms to drive millions of GenAI processing activities at high speed, and banks are wondering where this can fit into their businesses to make a difference. substantial difference. . This is the point at which a trusted partner brings the right questions to the risk appetite table, from considering the cost of training data models to the potential risk of leveraging foundational models in the cloud when it comes to possible relocation of customer data. Quickly determining the answers to these questions makes it very clear which use cases (if any) align with the bank's risk appetite.

On the other hand, an experienced service provider partner can help the bank refine an appropriate process and Proven business case for applied AI in a regulated environment, for use in code generation, for example, providing up to a 40 percent increase in productivity. These opportunities are an extension of applied AI cases already used in banks, such as pattern recognition, to identify unusual transfers or payments.

Banks should not underestimate the value of working with partners who can bring the benefit of knowledge and experience gained from working with multiple companies in the sector to their own explorations related to risk appetite. DXC is positioned to demonstrate its ability to provide everything financial institutions need to instantiate platforms and accelerate flexibility, and do so at scale, when and where it makes sense for the organization's risk appetite profile.