A risk could be defined as the uncertainty of an event to occur in the future. In the banking context, it’s the exposure to the uncertainty of an outcome, in the market. Several banks had lost billions due to imprudent risk-taking abilities. For the banking industry, the risks come with new types of entities, new technologies, ever-growing complexities of national and international regulations, as well as changing consumer behavior. The banking industry requires significant resources and investments to address financial and other risks naturally occurring as a result of the changes. With the advent of technology and with several banking apps, chief risk and compliance officers play a critical role in monitoring and managing the different risks to ensure a safe banking experience, and to ensure continuity of their businesses.
A successful banker/banking organization is one that can mitigate/control the risks and damage and create significant returns for the shareholders on a consistent basis. Knowledge of risks is required for Mitigation of risks.
Cybersecurity risk is the most prevalent IT risk in the banking industry. It refers to the risk undertaken by a financial institution to keep electronic information private and safe from damage, misuse or theft primarily by hackers. The crucial key to mitigating the cybersecurity risk is to ensure that the controls are applied across all business units and divisions to ensure that no permissions to access are granted unintentionally/without prior knowledge. Customer Data should be protected at all times with enhanced security features.
Some of the primary factors that result in cybersecurity risks are:
Open Banking Risk:
Open Banking Risk is similar to open source where the banking ecosystem functions as a single platform for a number of players like the regulators and government agencies, data providers, third-party providers, customers, to engage in an open infrastructure with an end motive to enhance the customer experience. Thus, customer data is more accessible to the players. While customer data enables digital products and also enhances the ability to build superior products, open source always has room for customer data breach.
To mitigate Open banking Risk, banks need to be agile in complying with PSD2 and GDPR directives laid down by independent government agencies, and the financial regulatory bodies to avoid exposing themselves to a pleothara of systemic risks which could lead to financial as well as damages to the reputation of the banks..