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MANAGING RISK
IN A DIGITAL WORLD
Successfully enabling the
quest for new revenues
FINANCE & RISK EXECUTIVES IN BANKS ARE INCREASINGLY
COMING TOGETHER TO HELP ADDRESS MANY CHALLENGES
How do we make our
BUS...
3
WHILE BUDGETS ARE BEING RAPIDLY CONSUMED ON
REGULATORY, INFRASTRUCUTRE AND TACTICAL ISSUES
2014 Compliance Risk
Study: R...
4
WHILE THE DIGITAL REVOLUTION IS RADICALLY RE-SHAPING
EVERY ASPECT OF THE BANKING INDUSTRY
Digital banking
transactions a...
DIGITAL REVOLUTION DRIVERS:
CHANGE WILL BE DRIVEN BY EMERGING CUSTOMER BEHAVIOURS
While also answering to Regulators and S...
6
NEW ENTRANTS AND BUSINESS MODELS ARE EMERGING
ACROSS THE INDUSTRY AS DISRUPTORS
LARGE
DIGITAL
PLAYERS
& FINTECH
STARTUPS...
7
WHILE FINTECH COMPANIES ARE CONTINUING TO EMERGE
BRINGING NEW INNOVATIONS AT PACE, WORKING WITH
ESTABLISHED MARKET LEADE...
8
OLD APPROACHES WILL NOT DELIVER NEW RESULTS AND THE
TIMING FOR ACTION IS NOW
Time
MarketPenetration
Traditional strategy...
1 GOVERNANCE
Risk Appetite Financial Management
9Copyright © 2014 Accenture All rights reserved.
Conduct & Regulation
• Le...
IT Resilience &
Business Continuity
Talent & CultureCredit Risk
Decisions
Operational Risk
(incl. 3rd Parties)
2 PROCESS
1...
Cyber Security &
Financial Crime
Digital Data
Sourcing
Analytics & Insight Data Privacy
3 DATA & TECHNOLOGY
11Copyright © ...
12
Learn more about Accenture Finance and Risk
www.accenture.com/financeandrisk
Copyright © 2014 Accenture All rights rese...
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Managing Risk in a digital world: successfully enabling the quest for new revenue

For the 4th consecutive year Accenture was a co-sponsor at the 21st Annual RiskMinds International conference in December 2014. Steve Culp, senior managing director, Accenture Finance& Risk Services, presented to more than 500 Chief Risk Officers in the plenary session on Managing Risk in a digital world: successfully enabling the quest for new revenue.

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Managing Risk in a digital world: successfully enabling the quest for new revenue

  1. 1. MANAGING RISK IN A DIGITAL WORLD Successfully enabling the quest for new revenues
  2. 2. FINANCE & RISK EXECUTIVES IN BANKS ARE INCREASINGLY COMING TOGETHER TO HELP ADDRESS MANY CHALLENGES How do we make our BUSINESS AND OPERATING MODELS AGILE, FLEXIBLE and suited for LONG TERM PROFITABLE GROWTH? How do we reduce the DUPLICATION & COMPLEXITY in our business operations? How do we manage the sudden increase in VOLUME & INTENT OF REGULATIONS in a cost-effective manner? How do we make our FINANCE & RISK FUNCTIONS more efficient & effective to drive better BUSINESS INSIGHTS? KEY QUESTIONS FACING EXECUTIVES 2Copyright © 2014 Accenture All rights reserved.
  3. 3. 3 WHILE BUDGETS ARE BEING RAPIDLY CONSUMED ON REGULATORY, INFRASTRUCUTRE AND TACTICAL ISSUES 2014 Compliance Risk Study: Respondents expect spend to grow by 10 to 20 percent or more over the next two years. Copyright © 2014 Accenture All rights reserved. FUNDING TODAY’S PRIORITIES 1 BUILDING FOR THE FUTURE SOLVING FOR THE PAST
  4. 4. 4 WHILE THE DIGITAL REVOLUTION IS RADICALLY RE-SHAPING EVERY ASPECT OF THE BANKING INDUSTRY Digital banking transactions are now worth c. £1bn a day, with c. 40 million mobile and internet banking transactions every week (Source: BBA) Copyright © 2014 Accenture All rights reserved. VALUE AGGREGATOR ADVICE PROVIDER ACCESS FACILITATOR Source: Accenture, The Everyday Bank, 2013
  5. 5. DIGITAL REVOLUTION DRIVERS: CHANGE WILL BE DRIVEN BY EMERGING CUSTOMER BEHAVIOURS While also answering to Regulators and Shareholders Regulatory Compliance New digital competition Deteriorating industry boundaries Pressure on profitability DIGITAL INTENSIFIES CUSTOMER POWER DIGITAL CREATES NEW COMPETITORS Copyright © 2014 Accenture All rights reserved. 5 Technology innovation
  6. 6. 6 NEW ENTRANTS AND BUSINESS MODELS ARE EMERGING ACROSS THE INDUSTRY AS DISRUPTORS LARGE DIGITAL PLAYERS & FINTECH STARTUPS FS P2P lending Virtual & direct banking Self service banks & kiosks Mobile insurance Mobile banking Mobile points-of-sale Mobile payments & e-wallets Real-time dynamic pricing Data-driven credit-rating Personal financial management tools P2P payments Copyright © 2014 Accenture All rights reserved. NEW ENTRANTS & MODELS
  7. 7. 7 WHILE FINTECH COMPANIES ARE CONTINUING TO EMERGE BRINGING NEW INNOVATIONS AT PACE, WORKING WITH ESTABLISHED MARKET LEADERS UBS Bank of America Merrill Lynch Credit Suisse Santander HSBC RBS Barclays Lloyds Bank VocaLink JPMorgan Chase Deutsche Bank Morgan Stanley Citibank Goldman Sachs Nationwide PixelPin Logical Glue uTrade Solutions FinGenius PhotoPay Waratek BehavioSec Digital Shadows Open Bank Project Erudine Squirro Kiboo Growth Intelligence OP3Nvoice Copyright © 2014 Accenture All rights reserved.
  8. 8. 8 OLD APPROACHES WILL NOT DELIVER NEW RESULTS AND THE TIMING FOR ACTION IS NOW Time MarketPenetration Traditional strategy Digital Enabling Strategy “A new form of market creation is emerging, radically impacting timelines” Accenture Institute of High Performance (Nov, 2013) Copyright © 2014 Accenture All rights reserved. Today 8 Copyright © 2014 Accenture All rights reserved. WINDOW FOR DECISION
  9. 9. 1 GOVERNANCE Risk Appetite Financial Management 9Copyright © 2014 Accenture All rights reserved. Conduct & Regulation • Leveraging alternative data sources into credit scoring e.g. using social media and customer ‘behaviour’ data • The ‘speed’ vs ‘control’ trade off during the transition periods to a pure digital back-office will need to be assessed • Portfolio monitoring rather than ‘name by name’ and an associated new ‘expected loss’ limit may need to be agreed • Provision of “advice” to a customer in a digital world will need to be offered and evidenced differently given the lack of person contact • Product development for a Digital channel needs to be fully scenario tested as flaws will be spotted early by customers • Demonstrating Treating Customers Fairly (TCF) will be even more acute given the lack of physical evidence. • Relationship to Pricing and Capital/Liquidity Management • Alignment of Finance & Risk data/systems to support accelerated decisioning • Digital money
  10. 10. IT Resilience & Business Continuity Talent & CultureCredit Risk Decisions Operational Risk (incl. 3rd Parties) 2 PROCESS 10Copyright © 2014 Accenture All rights reserved. • Increased speed to decision will be important in order to capture / retain highest credit quality customers • Hand-offs to third parties (e.g. under- writers) can’t be the manual ‘weak link’ in the chain • Better devices and better connectivity will improve user experience, but be an entry point for business risks. IT supply chain has specific assurance challenges • Cloud computing will transform the way businesses rely on IT. This will increase information stewardship control testing • As customers demand ‘contextual’ services or links and bundled products, the management of 3rd party suppliers to the same standard as the bank’s internal targets is equally important • Linkage from Mobile apps at the front end to core accounting platforms & payments systems • Digital support may challenge the traditional positioning of the three lines of defence. Real time operation will require risk and finance professionals to be more closely aligned • Senior Managers Regime accountability heightened
  11. 11. Cyber Security & Financial Crime Digital Data Sourcing Analytics & Insight Data Privacy 3 DATA & TECHNOLOGY 11Copyright © 2014 Accenture All rights reserved. • Using more data from disparate sources will require enhanced control, ‘big data’ management strategies, and ‘data conflict’ testing in order to build a more comprehensive view of the customer • Digital data monitoring can trigger early warning (customers searching for credit card deals, unsecured loans, payday lending) • Customers will have to become more savvy in terms of sharing data to avoid the burden falling on the Bank • Banks may need to ‘entice’ or compensate customers for using their data • Digital channels may attract customers who posses a higher tendency to ‘stress the boundaries of the truth’ due to the anonymity that the channel affords • Data and information (both customer/client and the banks) have a currency, but the reputation cost of breaches often eclipses the value of the underlying data • Capturing additional data sources and data points both from internal ‘silos’ and external ‘new media’ will build a more representative profile of the customer and validate historic assumptions
  12. 12. 12 Learn more about Accenture Finance and Risk www.accenture.com/financeandrisk Copyright © 2014 Accenture All rights reserved.

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