RUNNING THE BANK WHILE TRANSFORMING THE BANK

By Ashley Crawford, Risk Specialist at SAS UK

For C-suite executives tasked with managing vast sums of customer money, the challenge of updating legacy systems or implementing new technology can be daunting. Often they will question, ‘how can we continue to effectively run the bank and sustain seamless operations whilst working behind the scenes to improve the bank?’.

Frequently, this reluctance prevents them from adopting new systems and practices. However, delaying the decision to modernise systems and processes carries significant risks, particularly in today’s volatile market.

Legacy Systems and the Lack of Modernisation

Legacy systems are often built on outdated technology and can pose significant risks and limitations through the lack of flexibility and efficiency needed to keep pace with evolving market demands and regulatory requirements. Whereas modernised systems able to harness data and powerful analytics provide the flexibility and scalability required to quickly respond to market shifts, regulatory changes, and emerging trends.

However, legacy systems may hold data which provides a point of differentiation – for example, older banks hold a wealth of data which can lead to a competitive advantage over newer banks. But only if they can easily access it and leverage it with AI and analytics.

Delaying modernisation can leave banks reliant on manual processes and ill-prepared to navigate unforeseen challenges or capitalise on new opportunities. It can also lead to siloed data which create blind spots within an organisation, potentially leading to catastrophic oversights. Take Silicon Valley Bank as an example. A Federal Reserve Report noted how Silicon Valley Bank had serious problems with compliance and internal controls from 2016. Its reliance on manual processes and fragmented data made it difficult to effectively assess risks and ultimately led to significant financial losses and reputational damage.

The lack of modernisation can impact a bank’s ability to meet customer expectations, which in today’s digital age, are high. Customers expect seamless, personalised, and efficient service from their financial institutions and outdated systems may struggle to deliver on these expectations, leading to poor customer experiences and ultimately, customer attrition.

Whilst maintaining and integrating these systems can be costly and time-consuming, by delaying modernisation, banks risk missing out on these opportunities and falling behind competitors who have embraced technological advancements already.

Digital Transformation

Digital transformation is not an overnight solution, however it is something which should be considered immediately. As banks begin to embark on their digital transformation journey, particularly in the realm of asset and liability management (ALM), there are several points which should be factored in to ensure they continue to operate smoothly at the same time.

Seamlessly integrating data from diverse sources and implementing advanced analytics capabilities will empower banks to gain profound insights into their asset and liability positions, liquidity risk, and overall profitability. Furthermore, having robust risk management and compliance is non-negotiable, with digital transformation emphasising the development of resilient risk frameworks and compliance with regulatory standards like stress testing and IFRS9. This involves leveraging technology to automate risk assessment processes, enhance scenario analysis capabilities, and ensure adherence to regulatory guidelines.

ALM strategies must align with customer needs and digitalisation offers increased opportunities to personalise product offerings, optimise pricing strategies, and enhance customer engagement through digital channels.

Expert Partners

For extra confidence, banks can choose to partner with industry experts through the digital transformation journey who can offer them several benefits as they navigate their way. For complete success it is crucial banks choose experts who understand how to strategically align with the overall aims and broader strategic objectives of the bank, such as enhancing competitiveness, improving operational efficiency, and driving growth.

Experts can also bring deep knowledge and experience in specific areas including ALM, risk management, regulatory compliance, and financial technology. Their insights serve as a guide, helping banks navigate complex challenges and make informed decisions throughout the transformation journey.

Industry experts also have access, often exclusively, to best practices, cutting-edge technologies, and tailored solutions. These resources can accelerate digital transformation initiatives and lead to better outcomes for banks seeking to modernise their operations whilst maintaining successful operations. This also provides benefits when collaborating on risk mitigation so banks are able to address potential risks such as implementation challenges, technology disruptions, and regulatory compliance issues more effectively. Experts offer guidance and support to ensure that crucial elements like stress testing, IFRS9 compliance, and risk decisioning are properly managed.

As SAS, we’ve been working with banks to ensure success in an evolving digital world through leveraging analytics, AI, cloud, open banking APIs, fintech and RegTech technologies. Through managing increasing regulatory demands, stopping fraud, maximising return on capital and achieving operational excellence, we help banks offer customers what they really need when needed.

Navigating Modernisation without Disruption

To ensure banks can maintain smooth operations whilst navigating digital transformation, thorough planning is essential to ensure coordination and efficient execution. They should develop detailed implementation plans that outline specific timelines, responsibilities, and milestones and must adopt an incremental approach to ensure they break down larger changes into smaller, manageable steps. Clear communication with stakeholders, including employees, customers, and regulatory bodies, is crucial to manage expectations and address any concerns proactively. Industry experts can provide experience and knowledge to support this process.

Overall the decision to modernise systems and processes is critical for banks to remain competitive, mitigate risks, and meet the evolving needs of customers and the market. However, the process of migration can be complex and disruptive. It requires careful planning, substantial investment, and effective change management to minimise potential disruptions to operations and ensure a smooth transition.