Both risk and compliance management are dynamic fields that constantly evolve. Risk and compliance are impacted by a changing business environment, the economy, changing customer demands, and a company's vision, among other factors. Most of the changes we have observed in banking have been driven by information technology. The 2008 financial crisis was another significant force for change, as it forced the banking industry to rethink its risk management practices in light of the financial crisis's revelations of flaws and blind spots.
Bank compliance management is a complicated area due to the amount of documentation required and the nature of banking services. Bankers provide critical financial services to the community and all of the local economy's major stakeholders. This means they must interact with a variety of different types of entities, businesses in a variety of different industries, and individuals who are unfamiliar with compliance requirements. They must provide these parties with the financial services they require while also adhering to all applicable compliance requirements. The issue's complexity is one of the reasons that bank compliance management is increasingly being managed through technology.
By examining current banking and finance trends, banks can gain a better understanding of the changes that could affect them over the next couple of years. These trends are significant because they provide guidance to banks on how to future-proof their risk and compliance management infrastructure.
Regulatory Requirements That Are Becoming Increasingly Stringent
Since the 2008 global financial crisis, governments' tolerance for bank failures has waned, as has their appetite for initiatives that use taxpayer money to save banks. Regulatory agencies are now more aggressive in their monitoring of suspicious behavior, with many planning to employ advanced tools and technology to conduct more thorough audits.
Banks must rise to the occasion by establishing a robust regulatory compliance framework that enables them to quickly detect and monitor non-compliance and risk. This can be accomplished through the use of compliance management solutions that provide continuous monitoring in addition to streamlined compliance workflows.
Customer Expectations Have Shifted
Customer expectations shifts will result in a sea change in the banking sector's profile. When customers interact with their bank, widespread use of technology will be the norm. At the age of 40, the current generation of young people living in the digital age will be the largest revenue contributor to banks.
Customers appreciate digital banking services because they enable them to access their accounts and conduct necessary transactions at any time of day or night without visiting a bank. Digital banking benefits both banks and customers; banks benefit because they can provide services to customers without increasing headcount or other associated costs. Banks can serve more customers without expanding their physical branch network or hiring additional staff.
Analytical Data for Risk Management
Additionally, new risk management techniques, which are frequently associated with big data analysis, will be enabled by technology. The proliferation of modern technologies enables faster and more cost-effective processing and storage capabilities, enabling improved risk management and process integration. We have already seen the effects of technologies with significant risk management implications, such as big data and artificial intelligence. Predict360, our American Bankers Association-endorsed compliance management system, is powered by artificial intelligence.
As banks increase their reliance on technology to manage risks and compliance, more risk and compliance data is generated. This data can assist banks in anticipating risks and identifying emerging risks more quickly. Additionally, risk and compliance technology provide banks with real-time risk and compliance data. There is no need to collect data manually in order to create reports. Instead, real-time metrics can be displayed on dashboards, enabling more informed executive decision making.
Constant Need to Cut Costs
Banks have increased profitability by implementing advanced operational efficiency techniques. Banks have always been an integral part of our lives; we rely on them to receive our wages, manage our finances, obtain loans, and perform a variety of other banking functions. This enabled banks to develop multiple revenue streams in which they faced no competition. We have seen the rise of born-digital electronic payments and other financial services over the last two decades, which threaten to erode banks' market share.
Banks will need to rethink their operating costs in the future in order to deliver more value at a lower cost. Simplifying, standardizing, and digitizing will prove to be viable cost-cutting measures. By leveraging risk and compliance technology, banks can improve compliance and risk management while lowering management costs. This is accomplished through an incredibly rapid increase in productivity enabled by technology, which enables an organization's same number of employees to deliver greater value.
Developing a Framework for Risk and Compliance Management That Is Future-Proof
Banks considering investing in risk and compliance technology must ensure that the technology they select will endure the test of time. In this situation, cloud-based risk and compliance technology solutions have a distinct advantage. When a business adopts a technology, it is typically locked into that technology and must pay to access newer, updated versions. This does not, however, apply to cloud-based solutions.
Because cloud solutions are managed by the provider and customers pay for access to the solution, they are updated at the provider's discretion. For example, our Predict360 solution is constantly updated to reflect new market requisites and regulatory changes. Our customers are never concerned with out-of-date tools or technology.