Asia-Pacific banking outlook: Compliance culture depends on innovation

  • Financial Services
  • Solutions
  • Elisha Harrington
  • 2021
August 24, 2021

A man looks at his phone over an open laptop.

Banking institutions are risk engines. Customers know this. Bankers know this. Financial regulators know this.

Although no one likes to be turned down for a loan, risk due diligence is actually a good thing. The global financial crisis of 2007-2008 proved that risky practices of the past were not good for the economy, for society, or for confidence in the sector as a whole.

The challenge is finding the balance to meet responsible lending criteria while ensuring consistent customer satisfaction. Perhaps the answer lies in looking at risk management in a different way—through the lens of automation and transformation.

“In a world of unprecedented disruption and market turbulence, transformation today revolves around the need to generate new value—to unlock new opportunities, to drive new growth, to deliver new efficiencies,” Deloitte noted in one of its transformation reports.

The financial services industry needs to transform now, more than ever.

Digital banking transformation and compliance

Banks know that transformation is critical. However, as they look to transform from legacy models to new digital offerings, a big factor holds them back: governance, risk, and compliance.

In a highly regulated industry, there are a number of compliance issues that banks need to focus on. These include responsible lending to small businesses, enforcement and monitoring of loans to businesses, and the way products and accounts are administered, among others.

It's very important for banks to be able to demonstrate due diligence compliance practices while providing excellent customer experience. That’s why compliance has a crucial role to play across all types of regulation—and why technology needs to enable organizations to make this a reality.

Banks are changing. As Matt Baxby, CEO of Revolut Australia, says, “We will see a generational transition from trust in banks as a driver of loyalty. Trust in financial services used to be about safety and security—banks were the bedrock—there to keep your money safe.

“Now it is just as important to demonstrate you are acting in the interest of your customers, transparently and protecting their data and privacy. That will be an enduring legacy of the Royal Commission, which will only amplify with time.”

The key to redressing these trust issues lies in how financial institutions can make the digital experience seamless, effective, and efficient for all those involved.

Risk: The center of everything the organization does

In such a highly regulated market, risk, controls, and compliance need to be embedded within day-to-day activities. Imagine if it were possible to automatically detect risks and controls within the system. Rather than being seen as a separate function, they could be embedded within the front-line processes while servicing customers.

With increasing digitization and competitiveness within the financial services sector in Asia, it’s imperative for organizations to drive toward enhancing and uplifting a risk, resiliency, and compliance culture. This first line of defense is the beacon of good risk management through a singular focus on the user experience and high user adoption of integrated risk management technology.

Taking this approach would avoid and prevent breaches, fines, or risk events. It would also reduce customer financial claims and, ultimately, loss on the income statement.

"In a world of unprecedented disruption and market turbulence, transformation today revolves around the need to generate new value--to unlock new opportunities, to drive new growth, to deliver new efficiencies." Deloitte

Improving the digital experience reduces risk

There’s a perception that demonstrating compliance and due diligence requires a lot of time, effort, and resources that can take banks’ attention away from pursuing their innovation goals.

That’s not true.

In fact, embedding risk controls into the front, middle and back-office processes removes the reliance on onerous checklists and referring documents, manuals, and banker handbooks. At the same time, it accelerates institutional learning and banker time to competency. It also creates a digital audit trail across all value chains.

In fact, when financial institutions improve the digital experience, it benefits three groups:

  • Customers – who can easily get service and advice while protecting their data
  • Employees – who can be armed with modern technology and connectivity
  • Regulators – who gain assurance that banking and financial services are safe and secure 

Transformation needs to be handled carefully

Improving the digital experience does require transformation. As we observed above, this can be a risky initiative in itself. When handled incorrectly, technology can cause errors and frustrations that diminish the customer experience while introducing risks.

Inconsistent data structures and taxonomies between source systems create alignment and reconciliation issues and impede the ability to quickly assess and manage the impact of obligation changes.

Reliance on manual provision of data across functions, fragmentation of data sources, frequency of policy changes, and limited quality and level of granularity of data capture within some data sources results in increased manual effort and risk of errors within reporting and analytics.

The lack of integration between systems and workflow tools within and across processes produces many manual touch points. This prevents entire processes form being automated to improve both controls and process efficiencies.

4 steps for transformational success

When handled well, financial services transformation enhances compliance while reducing risk. Embedding risk and compliance automation controls across your front, middle, and back office gives you a foundation to meet the evolving expectations of both customers and regulators.

Taking an automated and integrated approach toward business resiliency and third-party risks will be key. It enables your organization to reduce risk, noncompliance, and underperformance through more informed and faster decision-making at every process.

ServiceNow can help reconcile data, streamline customer experiences, and future-proof financial services in an era of rapid transformation and changing market dynamics. By following a four-step process for transformational success, it’s possible for financial services institutions to be compliant by design:

  1. Build a solid foundation across IT and operations.
  2. Expand to continuous monitoring for governance, risk, and compliance.
  3. Expand to front-to-back intelligent servicing.
  4. Deliver differentiated customer experiences.

Following these steps can help you become intelligence-led; achieve real-time, digitized risk and compliance processes; and leverage the power of AI and machine learning.

Risk and compliance should be built in

Risk and compliance visibility is critical for the survival of financial organizations. Risk and compliance managers across all domains need a central platform to help regularly monitor and assess risks. This platform should easily provide reporting to executive leaders vertically and horizontally across the organization.

ServiceNow can take you through these processes. We understand the products and services that are being distributed: from event and agreement data to machine learning decisions and actions, communication and other inputs into assurance, audit and compliance processes. ServiceNow also knows the activities the banker carries out, the conversations bankers have with customers, and how they’re linked together.

More importantly, we’re able to take a front-and-center approach to risk: ensuring we don’t just address it head-on, but that we build it into the system.

Risk and compliance shouldn’t be seen as a separate function in every part of the business, or as a competing priority with transformation inside the bank. It should be embedded in everything a bank does and exist within a single, integrated business environment.

Learn eight steps to automate governance, risk, and compliance.

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