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Corporate Risk Hotspots In 2013

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By Bill Trueman CEO of risk prevention consultancy Riskskill, a division of UKFraud.

As a corporate risk prevention consultancy, we decided to open the New Year with a list of what we believe are the 8 biggest corporate risk hotpots faced by management in 2013. These are:corporate-risk-hotspots

1. Fraud. With fraud set to reach increasingly higher levels in tighter economic conditions, businesses face a battle with those who are determined to defraud them. In 2013, supply chain fraud will be a major growth area, as squeezed suppliers face temptation to cheat, often using IT systems to cover their tracks. This type of fraud can range from simple ‘weights and measures’ issues through to credit based fraud and professionally planned attacks. As a result, procurement fraud will reach record levels this year, where company purchasers, face a range of temptations, including bribes from suppliers. Generally, internal fraud is running at its highest level, with the UK government’s National Fraud Authority (NFA) likely to report continued growth in its annual survey of fraud. For the last 3 years it has reported estimated fraud losses that are roughly doubling each year.

2. Cyber Crime Attacks. Such intrusions will remain a concern in 2013. Daily automated attacks on bank and retailer systems runs into the millions. Businesses are especially exposed where they trade on-line, as the customers are faceless and there is comparatively little time to check the efficacy of the client’s details, and great opportunities for cheats. Controls over ‘apps’, such as payments through mobile and NFC (Near Field Communication) devices are also on-going risks that are growing as these technologies evolve. Technically skilled fraudsters and self-styled cyber-warriors’ love such conditions and it is a constant race for ‘switched on’ payment processors to find the ‘security holes’ before such people actually cause havoc.

High quality and large amounts of customer data reaches criminal hands every time that we see a high-profile data-security breach, and it gets harder for us all to tell the good guys from the bad guys. 2013 will therefore see an increasingly greater emphasis placed upon PCI DSS and other data-security and integrity issues. There will also be continuing government interest in talking about this subject with fears of major attacks on the country’s infrastructure.

3. Social and Other Media Related Risks. The huge rise in different types of mobile device platforms along with the corresponding growth of social media now poses a huge reputational challenge for businesses. Within minutes, organisations can be the victim of blistering customer backlashes which might or might not be justified. Many corporations are making a start by attempting to formally control how their own employees release company or workplace information through social media. The number of reported dismissals and legal cases for irresponsibly through social media is soaring, and beyond this there are increasing risks in ‘getting it wrong’ with ‘social-communications’. 2013 will see a significant rise in the ownership of social media policy by corporate communications management, and many more high profile ‘media’ cases.

4. Silo Mentality. Borne out of the desire to conduct business correctly, increasingly complicated silo structures have grown up in the business world, with the corporate tsars of compliance ‘vying for power’ with those running policy, risk and traditional management functions such as IT and finance. It is possible that key decisions on fraud policy, for example, will fall between these silos, that finds managers that are only partially responsible for an issue, and a whole gaggle of people who all feel that something is ‘their bag’. An without cross-function internal teams working closely with non-execs to allocate and refine wisdom, roles and responsibilities there is often ‘trouble in store’.

5. Big Data-Compromise Risks. As a result of corporate compliance and customer contact drives, organisations now hold increasingly huge volumes of data such as customer files. This development does pose its own data breach risks, as more criminals seek to steal data to use it for financial gain whether through buying goods on someone else’s account, taking over bank or card details, or simply selling lists to mail/market to. However, the evolution of the ‘big data’ culture will also deliver huge benefits in 2013. Recent improvements in business intelligence and data analytics technology have delivered significant benefits for those working to manage big data projects along with those focussed on the risk and compliance issues raised.
Companies can now monitor hundreds of millions of transactions continuously for patterns of potential fraud, cyber-attacks or money laundering. Often this is happening at speeds many times faster than even a year ago. It also allows marketing professionals to make more incisive assessments of customer behaviour and therein to tailor and fine tune campaigns accordingly.Bill-Trueman

6. Credit Risk Losses v Profitable Lending. Banks and other organisations, such as retailers, are under pressure from shareholders, the media and wider stakeholders to avoid bad-debts on one hand, whilst increasing profitable business lending on the other.
There is a potential risk of a lose, lose situation developing where once again such pressure leads to bad financial products and the risks of mis-selling and bad debts from over-stretched customers.
To take retail as an example, store-finance schemes and other ‘loyalty’ lending products face mounting credit exposures and losses through debt defaults, and write-offs.

7. Legal Claims. Whenever there is a downturn in the economy, people seek-out legal redress from anywhere that they can find it. The insurance industry and local authorities are tired of the ‘slips and trips’ type scenarios and is fighting the continual rise in these cases. However, many other organisations seriously underestimate how big the potential legal risks can be. They are likely to face even greater pressure on this front though in 2013, as the TV ad style accident and PPI lawyers start to look for the next big thing.

8. Environmental, CSR and Sustainability Risks
Often the investment in ‘environmentally friendly’ and wider ‘social responsibility’ issues and other ‘sustainability initiatives’ will be finely calculated parts of a wider ‘corporate score-card’. In more difficult economic times, these broader social and ‘green’ initiatives can suffer; the financial commitment made in the good times can also damage the longer-term investment, security and stability of businesses when things are tighter. So there is a longer term balancing of the risks required – i.e. the corporate social responsibility commitments flagged on the company’s website need to be measured against the real-life, long-term trading conditions. As reputation ‘can be all’, corporates need to make sure that long-term CSR commitments aren’t ultimately suspended or frozen with the risk of damaging their hard won reputations.

From our research and experience of many businesses, Riskskill can see that most organisations are needlessly at risk in a number of areas. Often the potential and consequential losses will be a major threat to businesses performance. To put them right and protect our businesses, we need to make sure that our processes, procedures and systems are clear, tight, ordered and well managed. Whilst the risks can usually be identified quickly and effective plans drawn up, it usually takes a little help and some wider corporate consensus to get things done. External risk management specialists, free of internal politics and silo rivalries, can help organisations appreciate quickly the level of risk they are running and plan accordingly. Strong internal risk management teams can also help combat the risks. However, the first step necessary for many corporations in 2013 is to recognise the risks they run and the need for change itself. Until they do, our role, as Riskskill, is to help people by continuing to highlight the risks most likely to be faced.

 

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Pandemic risks eclipse treasury priorities as businesses diversify investments to mitigate impact

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Pandemic risks eclipse treasury priorities as businesses diversify investments to mitigate impact 1

The Covid-19 pandemic has shunted aside existing challenges to sit atop treasurers’ priority lists, according to “The resilient treasury: Optimising strategy in the face of covid-19”, a survey run by the Economist Intelligence Unit (EIU) and sponsored by Deutsche Bank.

The results show that treasurers are looking to diversify their investments in a bid to mitigate the pandemic impacts, including heightened liquidity, foreign-exchange and interest-rate risk. As many as 55% plan to increase investments in long-term instruments, with 48% increasing investments in bank deposits, another 48% in local investment products, and 47% in money-market funds.

“The Covid-19 pandemic has drastically altered business plans in 2020. It has placed a certain level of strain on treasury processes, but the challenge it presents has been managed by traditional treasury skills. It is clear that pandemic risk will be on the treasury checklist for years to come, but it is one of many risks the department faces and will continue to manage,” says Melanie Noronha, the EIU editor of the report.

Despite Covid-19 looming large, other challenges wait in the wings. Notably, the replacement of the London Interbank Offered Rate was identified by 38% of respondents as the main challenge of their function.

Technology, meanwhile, continues to be a pressing issue, with treasury teams becoming increasingly reliant on IT solutions. Here, data quality is rising up the list of concerns. Already highlighted as very or somewhat concerning in 2019 by 69% of respondents, the figure rose to 78% in 2020. Acquiring the necessary skill sets to realise the full benefits of this data and technology is also a continuing priority – with some progress registered from last year. In 2020, 30% of respondents say they have all the skills they need to manage technological change, up from 22% in 2018.

“Treasury’s focus on technology is not only helping teams operate more efficiently in a remote-working environment, it has long played – and continues to play – a key role in realising their long-term priorities,” notes Ole Matthiessen, Head of Cash Management, Corporate Bank, Deutsche Bank. The survey shows that

Release 1 | 2  managing relationships with banks and suppliers (highlighted by 32% of respondents) and collaborating with other functions of the business (also 32%) remain top of the agenda – and seamless digital systems will help give treasurers the bandwidth and insight to be more effective partners for both internal and external stakeholders.

Based on a global survey of 300 treasury executives, conducted between April and May, the survey explores stakeholders’ attitudes among corporate treasurers towards the drivers of strategic change in the treasury function – from the pandemic through to regulation and technology – and their priorities for the next five years.

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Digital collaboration: Shaping the Future of Finance

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Digital collaboration: Shaping the Future of Finance 2

By Ryan Lester, Senior Director of Customer Experience Technologies at LogMeIn

With heightened economic uncertainty and increased customer expectation becoming the norm in the banking industry, it is understandable that the sector is struggling to keep afloat. Due to its precarious nature, banking institutions are trying their best to ensure they remain relevant in the competitive landscape and guarantee that their customers continue to be a priority.

When it comes to the first half of this year, the pandemic has shown how easy it is for industries to fail. Customers and companies alike had to get used to the new normal, as physical locations started to close. The banking industry felt this first hand, as banks were made to restructure how their business ran, with restricted opening hours and a wider push to motivate people to use online banking.

While some had already embraced digital options prior to the pandemic, this proved to be a stark contrast to the elderly population, who frequently visited branches to access their finances. Moving forward, banks have to adopt new methods to ensure customers get the most out of our their accounts, without their experience suffering.

Heightened Customer Expectations

When the pandemic reached its peak, people were encouraged to use online banking, as telephone contact was under strain with long waiting times and pressure mounting on contact centre agents. According to Fidelity National Information Services (FIS), which works with 50 of the world’s largest banks, there was a 200% jump in new mobile banking registrations in early April, while mobile banking traffic rose 85%.

With branches remaining closed, customers were continuously being urged to limit the amount of calls they made to the most urgent cases and consider whether they could solve their answers through mobile online banking or checking the company website. Although already being adopted in pockets of the industry, this was a real catalyst that spurred banks to up their game on digital channels and with self-service tools.

Banks are challenged with precariously balancing customer needs with the cost of personalised support. With the demographic of customers changing over the last few years, customers are becoming increasingly younger and more comfortable with technology. Influenced by the “Amazon Effect”, their expectations have raised to an all-time high, placing record strain on the sector

Customer experience isn’t just about support anymore, it’s about serving your customer at every point in the journey. Companies have an opportunity to elevate the experience they provide by moving beyond one-and-done interactions to create continuous engagements with their customers. It is starting to become a primary competitive differentiator in the market and one that doesn’t have a lot of variation. Deploying AI chatbot technology will be able to strategically help banks improve customer experience and raise the level of support that agents provide.

Digital collaboration: Working around the Clock

The benefits of adopting digital channels and self-service tools are second to none. By implementing chatbots, fuelled by conversational AI, banks will be able to help serve a wide range of customer queries and ensure they are protected from fraud and scams.

Ryan Lester

Ryan Lester

Conversational AI is exactly what it sounds like: a computer programme that engages in a conversation with a human. When it comes to service delivery, conversational AI can be deployed across multiple channels to engage with customers in ways that effectively address evolving customer needs. At a time defined by COVID-19, self-service tools such a conversational chatbots can work around the clock to solve customer queries in a concise and timely way. Of course, self-service tools won’t completely replace human agents in the banking industry, but they will help companies re-distribute customer traffic and workflows in ways that enhance customer experience. Self-service tools fuelled by conversational AI can also improve employee experience because service employees can handle fewer, but higher-level service tasks that chatbots might escalate to them.

Adopting new tools to help facilitate consistent and concise answers and help maintain customer experience is on the forefront of many industry minds. Banks such as the Natwest Group have seen this first-hand and are testament to the benefits that a good digital experience can provide. Simon Johnson, Capability Consultant, Digital at NatWest Group highlights NatWest’s use of digital tools during lockdown, “Over the last few months, we’ve learnt how to use digital tools to help our employees remotely. From a banking perspective, there have been a lot of changes including base rates, waive fees and the best ways of contacting our vulnerable customers, ensuring we keep them protected from frauds and scams.

“By introducing our Bold360 chatbot interface, Ella, we’ve been able to get relevant information out quickly, apply the best practice and ensure that our customer journeys are being developed correctly. Due to the volume of questions, some of our customers were finding themselves waiting longer than usual. So digital channels become essential to helping reduce the wait time. Using Bold360, we were able to mitigate issues and answer questions in a more timely way through our chatbot.

“Moving forward, as we open more digital services, we are analysing our data to see if customer will return back to their usual way of banking, now that they’ve seen what a good digital experience can provide. Either way, with Ella, we are ready.”

Chatbots and Humans: The Best Option for Customer Service

Over the last year, banking institutions have recognised the power that digital collaboration can have to their success. Delivering exceptional customer service and support is key for any business wanting to stay competitive in today’s market and banks are especially challenged with precariously balancing customer needs with the cost of personalised support. Leveraging the right technology, such as AI-powered chatbots, will enable the banking industry to provide better support and a more robust customer experience in the long term. Other institutions must follow suit, or risk becoming obsolete.

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A sleeping digital giant wakes? 4 key trends accelerating payments transformation in the US

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A sleeping digital giant wakes? 4 key trends accelerating payments transformation in the US 3

By Lauren Jones, International Payments Ambassador, Icon Solutions

The US payments industry is undoubtedly ripe for change. Before the unprecedented shock of COVID-19, digitization and payments transformation initiatives had been organic, piecemeal and predominately the preserve of the largest banks.

Now, increasing pressure means that financial institutions of all sizes are working to define a digital strategy to unlock new opportunities, drive business value, and stay competitive. But beyond the immediate impact of COVID, what underlying trends are accelerating digitization in the US?

  1. Real-time payments – the stimulus for change  

Real-time payments have been met with a degree of caution by US financial institutions. Risking traditional profit generators in return for potential revenues down the line is a gamble many have not been willing to take. But immediate payments are coming to the US whether banks like it or not.

Major payments infrastructure providers, including NACHA and The Clearing House (TCH), have moved to encourage immediate payment adoption in recent years. But the Fed, frustrated with a slow rate of progress, has announced that it is pressing ahead with the implementation of its FedNow system (despite significant industry objection). Although the Fed’s true intentions are open to interpretation and this may just be a play to accelerate private initiatives, it is a clear signal that they mean business.

This means holdouts risk their own ‘Kodak’ moment if they miss the huge opportunities in front of them by fixating on traditional revenue streams. Banks are in a position to support innovation across entire industries such as healthcare, which could be released from the constraints of paper-based bureaucracy and slow, expensive transactions.

Another opportunity that can be unlocked via instant payments is ISO 20022 (used in the TCH RTP system). It is the future of payments messaging standards and can greatly enhance various payments processes through increased data-carrying capabilities. More importantly given the current climate, citizens reliant on federal or state support can benefit from RTPs combined with additional data to immediately access emergency funds.

  1. The kids are growing up

The US is getting older. Consumers who were 10 when the iPhone first launched are now 23. This means we are seeing a ramp-up of digitally native Gen Z consumers (roughly those born between 1995 and 2010) accessing banking services.

Demographics are an inexact science and not perfect predictors (there are technophobe college students and 100-year-old Instagram influencers), but we can detect noticeable trends.

Younger customers don’t usually choose a bank because there is an ATM in their neighbourhood, a slightly better interest rate or an advert in the newspaper. Rather, a strong digital presence, personalised tools, rewards and experiences, and the trusted recommendations of friends and family, will have a more significant impact on customer acquisition.

Banks must look at the effect this will have on their longer-term digitalization strategy and be able to segment what this emerging customer base might want and how they will interact in years to come.

  1. Checkmate? Evolving corporate requirements

    Lauren Jones

    Lauren Jones

Corporate treasurers are people and their experience of seamless, immediate payments in their personal lives shapes expectations in the workplace. Although check usage for business-to-business (B2B) transactions is still the norm in the US and barriers remain, corporates are increasingly demanding the ability to transact in a real-time, omnichannel environment, 24×7.

The benefits are clear. Corporate treasurers stand to enjoy enhanced liquidity management and transparency, greater control over payments and enhanced data for reconciliation purposes. And for consumers, alternative digital payment options such as buy now pay later promote choice and flexibility.

  1. Increasing competition

A significant consequence of emerging consumer and business demand for digital offerings is the increase in competition from fintechs, technology giants and other third-parties. Traditionally, incumbent banks have enjoyed the advantage of consumer trust to offset more limited innovation. But as consumers become more comfortable entrusting their financial transactions to non-banks, banks must differentiate and digitize to remain competitive.

Data is where the technology giants excel, and their ability to personalise experiences and emotionally connect with their users is unprecedented. Banks need to learn from the positive aspects of this model to better understand their users and deliver meaningful, useful products and services.

For data to become the cornerstone of a banks’ customer relationship and take services to the next level, breaking the channel silos and extracting value from a comprehensive dataset will be decisive. But with only 18% of banks reporting that they are in the process of shifting from a transactional revenue model to a data-driven revenue model, this work has some way to go.

Taking customer propositions to the next level

Customers now expect services that work for them, not their banks. All banks, no matter the footprint, need to move quickly to offer a broad digital service platform that adds value to both the customer and the bank.

By defining a robust payments transformation strategy, banks of all sizes can remain fiercely competitive by rapidly lowering costs, unlocking revenues and promoting innovation

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