How Risk and Compliance Can Empower Bank Growth

Banks usually treat risk and compliance as essential parts of the business that enable the business to function, but do not expect the risk and compliance department to contribute to the growth of the bank. Note that both risk and compliance have a critical role to play in the strategic growth plans created by banks.

As a bank expands, it needs more sophisticated risk and compliance functionalities, that’s why most banks plan for an increase in their risk and compliance management costs and include these costs in growth plans. However, it is much rarer to see risk and compliance as the drivers of the bank’s growth itself.

From Cost Centers to Growth Drivers

Banks can shift the view of the risk and compliance functions from cost centers to growth drivers and doing so can deliver huge benefits to the bank. Both risk and compliance are typically considered cost centers because, while they require a lot of investment, they cannot increase the profit that a bank makes or contribute meaningfully to the growth of the bank. It is important to note that neither of these characteristics are inherent qualities of risk or compliance; they are just a consequence of the way risk and compliance are managed in financial organizations and banks.

Risk and compliance are highly critical and complicated domains. The risk and compliance teams within banks have a lot of critical workload – risk and compliance tasks that are urgent and also require a high degree of vigilance. The teams are often too busy managing the workflow and ensuring that existing bank operations are going through smoothly to be able to focus on delivering additional value. A huge reason is that the teams are so busy in risk and compliance processes and have a lot of administrative overhead.

Risk assessments are a good example of how many of the efforts in risk and compliance management is administrative in nature. Consider the many steps that a member of the risk team must go through to assess risks. They must first ask for risk reports from multiple departments. These risk reports then need to be studied and the important information from these need to be extracted. The information then needs to be standardized so it can be brought together and analyzed. Note that the actual assessment hasn’t even begun yet; all these actions are prerequisites of the actual risk assessment.

Risk management technology automates most of the prerequisites. There is no need to collect information or risk reports – all the information is already being stored in a central risk management platform. There is no reason to study each report to be able to extract the relevant information either, because all the data is automatically standardized by the risk management platform. The person doing the risk assessment has everything they need to perform the risk assessment directly instead of spending time on administrative tasks.

Generating Value

Shifting risk and compliance from cost centers to growth drivers would require these departments to either contribute financially to the bottom line of the business or contribute strategically to the growth plans of the business. Once the administrative tasks have been automated, the risk and compliance teams will have the time to generate value for the organization. The compliance team can focus on training and monitoring, allowing them to improve compliance levels across the organization. This reduces chances on non-compliance and the ensuing penalties and fines that are levied by regulatory bodies, thus directly having a positive effect on the finances of the bank. Compliance technology also helps bank reduce compliance costs, which puts the bank further in the green.

Generating value is even easier for the risk management team because the risk management team can help upper management make the right decisions. The risk managers within a bank should be the most well-informed people in the organization about emerging risks and upcoming opportunities. Risk management technology can help the risk team to predict emerging risks. Information about emerging risks is critical for strategic growth. Instead of simply managing the existing risks, focusing on predicting risks helps the team generate value for the organization.

A Change in Technology and Perspectives

Banks now have access to better AI based technology than ever before, but a simple change in technology is just the start. Banks will need to change their perspective about risk and compliance and understand that they can use better risk and compliance practices and tools to beat the competition. Not many banks are using risk and compliance as a competitive advantage, which is why the strategy will be so useful for the banks that pioneer it.

If you are wondering how risk and compliance can be transformed within your bank, you’ve come to the right place. Get in touch with our risk and compliance experts to see how your bank can become more agile and how your risk and compliance teams can generate more value for the bank.