Common Problems Can Cause Risk Management in Banking to be a Challenge
There are always new software solutions promising to handle your technology requirements, while relieving you of all heavy lifting of risk management in banking. You know that it’s too good to be true, but you may be tempted to implement one of these programs without taking the necessary steps to ensure you’re not exposing your bank to unnecessary risk.
Here are five common mistakes that banks make when evaluating technology:
Failing to develop a risk management plan: Any time that a bank is evaluating and implementing new software, risk and uncertainty are a core part of the consideration. It’s important to establish a list of possible risks and potential solutions if that situation were to occur. It is generally helpful to divide risks into two categories: the risk of financial loss and the risk of losing financial opportunities. There’s also residual risk, or the amount of loss that a bank is willing to absorb before investing more in IT.
Failing to get buy-in across the organization: There should never be just one “fix it” manager in handling risk management in banking. The decision to implement a new system, and the support of that system, should be shared across the organization. Involving managers from various departments significantly improves the likelihood that your new technology’s transition will succeed.
Failing to get complete board buy-in: Ultimately, your board is responsible for risk management in banking, so make sure that you have enthusiastic support from your board of directors. Make sure that when you present your plans for new technology, you also present your risk analysis and management plan.
Failing to update your risk management plan: Like so many business strategies, too many risk management plans are developed with a high level of attention and care, only to be forgotten after implementation. A risk management plan is a living document, and must be revised on a regular basis to be effective.
Failing to get (the right) outside help: When it comes to technology implementation, it’s important that you don’t go it alone. Better yet, choose a software vendor that specializes in bank technology and has extensive understanding of risk management in banking.
Adopting new technology is necessary for remaining competitive in an industry where customers want the latest convenience and tools. It’s important, though, to understand the possible risks your bank is exposed to with any new system and take appropriate steps to protect your institution.
At CBA of Kansas, we provide the resources and access to products and services that support your risk management efforts. To learn more about the benefits that CBA of Kansas members receive, read more here on our website or give us a call!