Jeroen de Jong, Product owner Risk Intelligence at ING, joins the FutureRiskMinds initiative to discuss his vision for the risk management in the future, and what challenges the industry will need to overcome to succeed.
I think risk management is at its most exiting phase in its evolution. Risk is no longer only a necessity for the bank’s financial stability and regulatory compliance, but also as an essential part of the bank’s strategy and operational effectiveness. Risk management faces a period of large scale changes among others:
- Revisit current approaches by centralisation of knowledge and technology such as behavioural analytics, automation, and/or reliance on third party applications, which leads to a more efficient (usage of resources) and strengthened (intelligent) risk function;
- In relation to point 1 this requires different skills and move towards more adaptable analytic, challenge and advisory skills;
- Data flexibility and accuracy must made sustainable by defining a risk/finance data architecture to enable quick responses to regulations and investigations independent of current processes, products and technology;
- Delivery of analytics and digitisation of risk processes for more effective and efficient decision making by e.g. pattern recognition, real-time preventative controls, and (robotic) process automation. This will allow to free up resources for higher value activities.
The risk function needs to further develop the skills and ability in many areas. This in order to swiftly identify and address new threats (data loss, cyber, etc.), be more agile and modular, deliver new technologies and techniques, and increase partnering with finance, operations and the business. The success of adopting to these changes will help to attract and retain staff with skills that are required for risk’s future.
Risk eco system future
From my point of view ING/banks will continue to operate in uncertain political and social landscape with no tolerance for (perceived) misconducts. Next to that, ING/banks will continue to serve in a highly competitive environment challenged by disruptive innovators or bankers, which requires a revisit of current risk methodologies. And lastly stakeholders will put pressure on ING/banks to consistently and sustainably meet the cost of equity, constraining losses, in which risk management is important part for cost containment and revenue growth.
Banks need to:
Remain confident with credit loss forecasting, and the ability to effectively manage workloads of collections and recovery, by relying on the early-warning systems.
Ensure that clients behaviour incentives are carefully managed in situations of downside, traditionally de-risking, and upside, spot-on fulfilling credit needs (opportunity).
Improve cost of effectiveness in which the risk function must promote digitisation of the business and in which risk processes are an intricate part of products, services and process flows.
Identify and manage and new emerging threats such as risk related to data usage and cyber (crime), which requires compressive staffing, tools and knowledge.
Strengthen and better display the risk culture.
Risk function must position itself as an enabler and advisor at the start of innovations and digitisation of processes in order to protect ING’s reputation and secure the risk culture as an integrated part of new and changed business models. Exploring new technologies and analytics which will help to optimise credit decisions, grow assets volume, and drive operational efficiencies.
