How To Mitigate Risk Without Hindering Innovation

By Craig Beddis, CMO, Automic

It’s no secret the sheer speed of business processes has heads spinning and eyes glued to ensure nightmares from Knight Capital and flash crash do not have an encore. As a result, financial organisations are re-focusing the workforce efforts away from innovation and transformative strategies to fire fighting. When 80 percent of the time is spent just keeping the lights on, there is not much time left for innovation.

Safeguarding business continuity means realising that more is not always better. Constantly adding automation solutions means the organisation is only as good as the weakest link, hampering the ability to streamline core processes, ensuring compliance, reduce time to market for product innovations.

With 57 percent of IT investments under delivering on business value, three principles for applying next generation strategies should be considered: run the business, build the business, and transform the business.

Run the Business

Banks, both retail and investment, are at a tipping point. Institutions need to transform and transcend, and in some cases, make up for lost time. With heightened customer demands for market defining technologies and next generation strategies such as virtualization, cloud, and mobile coupled with sweeping regulatory reforms, CFOs are already managing a high degree of risk. However, this is a reality that cannot be escaped. Continue with ridiculously complex, siloed, disparate operating systems leads to casualties and instead of mitigating, risk is actually being built into the system. This is equally a two and ten year problem which only stands to implode if the peak and troughs distract the progress.

Treating the whole system as one heterogeneous unit from business to infrastructure delivers a complete view of the former siloed systems. Priority schedulers, operations, development – any changes made to the infrastructure – should be rolled out consistently therefore eliminating the risk of disrupting the broader infrastructure. However, re-engineering processes should complement what’s currently in place, avoiding the costly rip and replace mentality. The level of risk involved in transition can be daunting but approached correctly; it becomes understandable risk, calculated risk rather than an amorphous endeavour.

Build the Business

Any organisation operating on legacy systems has the potential to create devastating systemic workflow disruption. Something as mundane as a backup could absorb up to 40 percent of system resources, slowing down end users, response to market, and directly impacting (and disgruntling) customers. To others, application releases, which is standard business practice today, is still considered a dark art with many organisations inhibited by existing tools and building costly proprietary systems as a means to feign adaptation.

Transform the Business

Product innovation is often motivated by human behaviour. Mobility is a ‘so what’ issue now, primarily due to the fact that everyone is an end user. The world is far more transactional as a result. Shareholder portfolio apps for real-time trading are no longer theorised over cocktails. Spending habits are changing and therefore transaction frequency is sky-rocketing. Consumers can browse, evaluate, and purchase from anywhere, on nearly any device and therefore these high transactional models means banks are juggling more real time processing. Yet they embrace transformation, welcoming augmented reality to redeem checks, split bills, and even tap devices to transfer funds.

Cloud control and big data digestion have also lost their novelty but not their endurance. Until regulations to manage cloud strategies are simplified for private, public or hybrid, the legal implications appear too far-fetched. While private cloud is for the most part, the only toe in the water, customer data protection and security are paralysing exposures. The benefits offered by private cloud; scalable, flexible and location agnostic are proving true for larger, ambitious deployments. Institutions using services to augment their existing on-premise deployments are freeing up capacity restrictions, but still allowing the security concerns to curb their potential. As cloud continues its charge into the mainstream, institutions will need to seriously weigh up the options available to increase agility and technological leadership, and tackle workloads and computations previously deemed impossible.

On the compliance side, the sheer density of audit trails frightens institutions with limited visibility, unable to confidently determine that they are adhering to regulatory requirements, let alone if their day-to-day is contributing to additional vulnerabilities. Additionally, any lack of real-time access means huge losses for sensitive valuations such as derivatives and equities. However, global Fortune 500 institutions are discovering the potential of transformative capabilities and seeing real progress, some with deployment time reduced by 90 percent and manual application deployment tasks cut by more than 80 percent. And this isn’t a long term goal, it’s happening right now.

Ultimately the question all financial institutions have to face is why bother with the repeatable stuff and why not focus on making the most of that time? IT delivery paradigms should be simplified, sleek and uncomplicated operating as if many hands were not only light work, but realising the true power available. Covered all tracks and ticking every box is an earnest and tedious approach, yet to truly make risk analysts happy, build the risk out of your systems and initiate an attitude shift.