Back to the Future in Risk Management, Part 3: Preparing for the Digital Tsunami

by Cubillas Ding, November 30, 2015
Industry Trends
Global, EMEA, North America

Abstract

Celent urges the office of the CRO to further address the impact of digitalization on core parts of a financial firm’s client-facing and transactional value chain.

 

Much has been achieved in recent years from the financial industry’s efforts to comply with regulation and structural reforms. At the same time, opportunities and threats around the advent of emerging digital propositions and operational paradigms are presenting new competitive dynamics and potential disruptive effects. These cannot be ignored from a business risk, financial risk, and operational risk standpoint.

In this report series Back to the Future in Risk Management, Part 3: Preparing for the Digital Tsunami, Celent examines the expected impact and implications of digital trends on risk management and compliance activities.

Technology has been at the heart of the risk management and measurement for a very long time (pre-dating the Internet era), with an emphasis on analytics, process automation, and reporting/visualization technologies. However, what has changed (and is in fact accelerating) is that digital technologies and the Internet are triggering second and third order business model revolutions, based on the augmentation of physical and virtual spheres, innovations in service delivery and customer interaction models, and creation of digital networked organizations. These are both a source of risk and a potential enabler for new risk management capabilities.

“In looking at the risk value chain, we see growing opportunities for financial services firms to digitize their business and risk management operational models in various areas,” says Cubillas Ding, a research director with Celent’s Securities & Investments practice and author of the report. “As transactional value chains are redesigned and digitized, firms will be forced to execute similar transformations for risk, regulatory, and compliance processes, especially those that are directly linked in with transactional workflows.”

In a rapidly evolving landscape, financial services firms must evaluate the hive of activity around digital developments and FinTech disrupters carefully to respond in a balanced and considered manner, and not least to maximize the use of scarce resources, especially in the current heavy regulatory environment.

In the report, Celent analyzes core aspects of the risk management value chain to uncover the best opportunities for impact and presents action points for the CRO office to plan and execute a response to digitize their risk management operational models.

This report contains 9 figures and tables.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is part of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

Enter the Digital Era

2

 

Charting the Rise of Digital: Where Are We in the Shift?

2

 

The Digital Age, Its Numbers, and the Next Wave

3

 

Digitization from a CRO’s Perspective: A View of Impact Factors

5

Opportunities in the Risk Value Chain

7

 

Considerations and Starting Points

7

 

Uncovering New Digital Paradigms for Risk Management

7

 

High Impact Opportunities

9

Innovating to Embrace Digital for Risk Management: Action Points

12

 

Broader Digital Trends and Imperatives for Risk Management

12

 

Vital Capabilities for Next-Generation Risk Management IT/Operations

13

 

Innovation, Business, and Technology: Execution Success Factors

15

Conclusion

19

Leveraging Celent’s Expertise

20

 

Support for Financial Institutions

20

 

Support for Vendors

20

Related Celent Research

21

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