The Role of Risk Managers and Their Take on Innovation for Fintech
With time, it has come to a conclusion that Fintech Ecosystem have finally found an answer for structural innovation, and it seems to have caused quite a stir. PSD 2 (Payment Services Directive) have recently reported that they intend to give third parties access to customer account data, exclusively in the EU.
On the flip side, however, more complex and complicated regulations – such as MiFiD 2 – are bound to impose some form of data management and record-keeping requirements. With these recent changes, it’s likely to result in more outsourcing to other companies in the future. Originally, outsourcing used to be given to higher, more well-known businesses, such as Cognizant, but with this day and age, you get the same amount of work and prospects from a start-up, as you would with any other big business.
Risk Managers and their Structural Change Oversight
A recent finding from a GARP survey, where a number of risk managers were asked a series of questions has reported that just over 60% of risk managers have no involvement when it comes to innovation management. AI, which many businesses and companies now adopt due to larger structural changes in the technological bases of their economy, there is practically no risk management oversight involved. With this, very few organizations have chosen to create any plans that may mitigate that adoption risk.
The data from the survey shows that risk function needs some form of framework, preferably a disruption-planning type. With this in place, it could highlight both risks and opportunities that could arise when it comes to potentially changing market structures.
10-year Journey for Innovation
With any type of innovation, there’s typically a long-form journey to go through before getting to the final product. Take Apple’s iPad 2; come 2010, the iPad 2 was easily one of the most popular pieces of tech to have ever graced the market, but CEO and founder of Apple, Steve Jobs had been working on his original version of the iPad, originally known as the Message Pad in 1993. Through the years, the Message Pad was refined, recoded, updated, and scrapped numerous amounts of time before the company finally designed a piece of technology that the world fell head over heels for. Any type of success like this requires a significant journey and even though it may look like an overnight success, it’s never quite that simple.
Something similar can be seen with blockchain and other related technology. They may already be 8 years old at this point, but just like the Internet of Appliances, which launched in 1996, they appear to be evolving. Does this mean that risk managers are conversant and up-to speed with long-term patterns of innovation?
Micro and Macro Intelligence
To put it simply, risk managers need more knowledge. They need to learn how to model macro-disruptions like platforms, they need to know how innovation truly works, but they also need to be made aware about the risks and opportunities of these new skills. Dealing with start-ups and how to manage any information gaps that might rear its head in ecosystem development would also be a key skill that they would need to find themselves learning and picking up on.
To put it briefly, there needs to be an agenda, one of a slightly fuller stature than there is now to ensure risk managers conduct effective enterprise risk management at all times.