A recent report by EY has warned that the financial services sector must revamp its approach to risk management in order to thrive in the digital age. The report said that businesses should be proactively looking for new technologies and adopting risk management to drive profitability. 

This involves utilising risk management to implement and access new technologies that would otherwise be too hazardous. The report encourages firms to take more ‘risk-informed’ decisions to adopt new technologies and generate business opportunities. According to Carl Davies, CEO of TmaxSoft UK: “The sector’s failure to optimise risk management to aid digital transformation is indicative in its dependence on mainframe systems. Mainframes still process 70% of the world’s financial transactions, despite their inability to provide many of the functions that consumers now require.

Carl Davies commented, “The mainframe has been the bedrock of most financial services institutions for decades, and while these systems have served their users well during this time, many organisations are finding that they are increasingly failing to provide the functionality they now need. 

“Customer expectations are on the rise as fintech companies and challenger banks continue to leverage new and flexible IT systems.While many traditional banks have introduced services such as mobile banking apps and live customer chat services to adapt to the changing consumer demand, many still operate with traditional legacy IT systems that lack the ability to serve their customers with the flexibility they have come to expect. This in turn slows down the pace of innovation. Speed and responsiveness are crucial in an age where real time customer data and insights can make a major impact on businesses’ bottom line.

Davies continued: “If traditional financial institutions are to thrive in the era of digital transformation, they must take the initiative and adopt advanced IT environments that are compatible with the new breed of digital services. Large scale migration projects can be unpopular in some IT departments given the risks involved, but there are ways to manage these issues that make a TSB-style scenario highly unlikely. 

“When it comes to moving away from a mainframe system, one of the riskiest tasks is altering programmes and applications, or re-writing code. Re-engineering systems can take years, which means that the scope for error is far-reaching.  As a result, businesses can choose to re-host as it enables them to simply lift existing mainframe assets and shift them to new open platforms. Re-hosting is faster, less risky, and helps systems to operate in the exact same way, but many organisations still choose outdated strategies that put them at harm.”

Davies concludes: “As highlighted by the EY report, with the right approach to digital risk management, firms can open doors to a wealth of new technologies that were previously unattainable. Risk management is no longer just about protecting business operations and assets. It’s increasingly responsible for driving business transformation and opportunities in the digital environment.”