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The role of governance, risk, and compliance in digital transformation for banks


Digital transformation for banks requires a careful balancing act.

On one hand, COVID-19 pushed digital evolution into overdrive, with an increasing demand for digital banking and a greater shift to remote workplaces. Banks need to adapt quickly to keep pace with market demands and the realities of a post-pandemic world. On the other, they also need to exercise caution. Without thoroughly assessing and planning initiatives, new technology could bring serious financial, reputational, and regulatory consequences. 

There are many aspects of large-scale digital transformation and modernization that banks need to get right—but among the most critical is a governance, risk, and compliance (GRC) strategy.

In this article, we dive deeper into governance, risk, and compliance for banks: why it's important, what the right approach looks like, and best-practice frameworks.

Every new technology has risk

GRC issues are always a possibility when onboarding new technology, and even more probable when you're not prepared for them. Problems like an incomplete General Data Protection Regulation (GDRP) process or a weakness in the security profile can be better addressed and managed if planned for in advance.

The possible risks when onboarding or integrating new technology fall into five areas:

  • Security. New technology that creates a breach point in your digital ecosystem.
  • Availability. New technology that takes up too much space or slows down other areas.
  • Processing integrity. New technology that damages your ability to capture data accurately.
  • Privacy. New technology that exposes your passwords, processes, or trade secrets.
  • Confidentiality. New technology that gives people unauthorized access to sensitive material.

At best, a major issue in any one of these areas could damage the bank's brand reputation and cost you future business. At worst, it could bring down parts of your operation and damage customer confidence and satisfaction.

It's critical for banks—who operate in an increasingly demanding and digitally driven ecosystem—to have the right approach to the internal controls framework governing the infrastructure, platform, applications, and data.

What's the right approach to risk management for banks?

Traditionally, risk management has been more reactive than proactive when it comes to mitigating threats and other areas of concern.

COVID-19 has driven a need to modernize the way we think about risk. To succeed with digital transformation, banks need a more proactive, advanced approach—namely, a continuous risk monitoring and assessment model. BDO's risk advisory team employs this kind of methodology, using AI and machine learning tools to augment risk management capabilities.

Continuous risk monitoring and automation can enhance a bank's ability to assess risk and identify issues with new technology before they become a threat, as well as keep up with the accelerated rate of change the industry now faces.

A new technology risk assessment should include the following:

  • A demonstrated understanding of how the technology works, how to use it, and how it should benefit the bank when implemented correctly and adopted as planned.
  • An independent assessment to address trust and security issues in hybrid and multi-cloud environments, and a remediation plan.
  • A look at third parties involved in the implementation, operation, and maintenance of the technology, with a focus on the key internal controls around data sharing, technology integration, operational dependency, and vendor resiliency.
  • A validation of the protective capabilities across the digital ecosystem when data is in use, in transit, and at rest.

The benefits of performing a risk assessment for new technology can't be overstated

Deploying new technology as part of a digital transformation strategy has a lot of moving parts, especially with modern tools and platforms that combine on-premises and cloud capabilities. Green-lighting an implementation with confidence is a key accomplishment. It won't necessarily guarantee a smooth process, but an assessment will put you in a much better position to handle unforeseen risks through:

  • Alignment with business objectives
  • Balance between costs and benefits
  • Agreed-upon indicators of program and/or platform effectiveness
  • Established trust and transparency with third parties
  • Criteria for disclosures about IT risks and controls
  • A coordinated and standardized approach to IT control standards
  • IT-integrated enterprise decision-making and risk management

And with the kind of comprehensive GRC assessment offered by BDO, you'll have best-practice frameworks such as:

  • COSO's Integrated Internal Control Framework
  • ISO/IEC 27001/27002
  • NIST
  • PCI
  • SOC 2
  • Internal standards and frameworks

By leveraging BDO's experience, you will also get SOC for Cybersecurity to have common criteria for disclosures and overall program effectiveness, and Cloud Controls Matrix (CCM) to assist in assessing the overall security risk of a cloud provider.

Why choose BDO for your governance, risk, and compliance needs?

Scale and experience.

We help banks and other financial services clients grow their offerings through technology, and have extensive experience with large-scale cloud infrastructure and migration projects in highly regulated and complex environments.

Learn more about the specialized services we offer the Canadian banking sector, or contact us to discuss how we can help you define and achieve your goals:

Mike Gelesz, National Industry Leader, Banking & Financial Services, Consulting

Sam Khoury, National Financial Services Leader

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