The speed and scale of digital transformation within the financial industry is creating new risks, according to a new report .
According to the paper, there is an emergent need for firms to consider their exposure to risk in today’s digital age.
“Digital transformation is both inevitable and necessary for the financial industry,” said Matthew Hayday, Leading Partner, Global Technology Services at Parker Fitzgerald.
“A forward-looking agenda should highlight its impact on the industry’s risk landscape.
“To safeguard their organisations through the digital transformation journey, financial firms need to close the gap between their digital aspirations and the reality of their legacy IT estates.
“Key activities include reducing reliance on legacy systems, de-cluttering redundant systems, and using analytics to predict and quantify the impact of non-financial risks.”
The report outlines how new technologies, including artificial intelligence, machine learning, and cloud computing allow the financial services sector can allow them to significantly reduce operational costs.
But, without assessing the associated emerging risks, including internal risk management processes, adoption of this new technology could lead to threats across the sector.
The report comes days before the enforcement of the GDPR, and calls for firms to begin placing the safeguarding of data at the core of sustainable digital finance.
It also suggests that firms should begin to close the gap between their digital aspirations and the the capability of their technology.
“This isn’t a zero-sum game; these risks are not isolated to specific organisations and financial services firms can harness innovation while simultaneously tackling these new challenges, through the analysis of operating models and building new risk frameworks,” said Dan Crisp, Director of Technology & Digital at UK Finance.
“The industry is working hard to develop technology and water-tight risk programmes, but only collaboration with policymakers and regulators, both domestic and cross-border, will facilitate success.”