Automation is a common buzzword these days in the financial services industry. What does it really mean for your business, and how far can you take automation through your credit origination process?
We have compiled the top five benefits of applying automation throughout your credit process.
Reduce back and forth client interactions Instead of scanning, emailing, and faxing financial information and supporting documentation, customer-facing interactive portals and APIs can facilitate digital capture of required information.
Eliminate unnecessary manual work By leveraging a portal that connects to the borrower’s financial accounting package, and has the technology to read tax forms digitally, you can reduce the amount of unnecessary manual data entry.
Make quicker and smarter decisions Through the application of innovative machine-learning technology, the time required to generate financial spreads can be significantly reduced.
Maintain high-quality data accuracy and governance Data integrity can potentially be compromised when several systems are used to store the same information. Turn-key integration between your customer engagement portal and loan origination system helps to keep all your data within one system.
Gain a complete view of your portfolio With improved accuracy and quick access to available data comes better and faster insights into your portfolio. By reducing the need to consolidate and reconcile data from multiple sources, problems within your portfolio can be addressed in real time.
For most banks under the $20 billion asset threshold, blockchain technology—the distributed ledger—will be a tool like every other technology tool. Banks under that size will be provided that tool by established providers or very large institutions and the tool itself will enable typical banking businesses like extending credit, payments and wealth management.
While there is a ton of argument about the validity of the distributed ledger as a tool that enables currency that is untethered to a government or regulation, there is widespread belief that the technology behind the currency itself can carry value and be a boon for banks. It is useful because blockchain technology is enables faster, cheaper and fully transparent transactions in near real time.
Blockchain has potential to carry property deeds, stocks or insurance. Many banks have been skeptical about the technology because of the speculative nature of the cryptocurrency market and the dubious ethics of some of the folks running that market. But now many banks are starting to see it as a solution for quicker, cheaper transaction options.
JPMorgan Chase and the National Bank of Canada announced a debt insurance blockchain test. They believe that they can move debt insurance cheaper, faster and more securely on the distributed ledger, and they are doing a year-long test to find out. If that test works, the platform will have faced many challenges and presumably overcome them. It will have to get multiple regulators to sign off on it, it will have to integrate old systems’ data with the new platform, and it will have to prove that this new technology is actually superior to old systems.
Many banks under $20 billion can and will use it when it is rolled out by a reputable provider. So don’t worry too much about blockchain for now—you will be using it when it has been developed by a much larger institution with the capacity to invest in its trials. One important part of that process will be creating shared protocols. Right now, there is no one blockchain, and there is no one common language where one chain can talk to another. That will probably need to change if it is to become ubiquitous.
There are exceptions for banks below $20 billion When you are a bank that is a specialist in a particular line of business, you should watch the enablers of that specialty with keen interest. If a bank makes 80 percent of its profit through commercial real estate lending, for instance, that bank should be looking at anything that enables better, quicker, easier service, better pricing, or cheaper production. Adopting the technology that gets the bank in front of most competitors will eventually increase potential for growth, profitability and market share.
It doesn’t matter if that technology is Statistical Analysis System (SAS), or on a distributed ledger, someone in the bank should be trying hard to be the second adopter of the technology that will make the bank so much better at what it does well. That is when a bank should care about blockchain—when it is proven enough to not to be a nightmare to your bottom line or your employees, and provides a competitive advantage in an area that really counts.
How can financial institutions proactively combat the risks facing the industry today? The 2018 Risk Survey—presented by Bank Director and Moss Adams LLP—compiled the insights of directors, chief executive officers and senior executives of U.S. banks with more than $250 million in assets. According to the survey, the worries keeping top executives awake at night align with the key priorities that banks commonly hear from banking regulators: cybersecurity, compliance and strategic risk.
Cybersecurity Cybersecurity was the biggest concern by far, reported by 84 percent of respondents.
The survey addressed the confidence that executive and directors have in their institutions’ cybersecurity programs, with an emphasis on staffing and overall effectiveness. Access to the proper talent—in the form of a chief information security officer (CISO) or a strategic partner with the necessary skill set—and associated costs are key to a successful program, and 71 percent of respondents revealed their bank employs a full-time CISO.
While technical skills are valuable in today’s business environment, financial institutions must overcome their dependence on skilled technicians who don’t necessarily have the ability to strategically look at the changing technological landscape. The CISO should build an appropriate plan by taking a full view of the bank’s technology and strategy. Without this perspective, a bank could provide hackers with an opening to breach the institution, regardless of size or location.
Institutions building the foundation of a robust cybersecurity program should also focus on three key areas:
Assessment tools: Is the institution leveraging the proper technologies to help maximize the detection and containment of potential issues?
Risk assessments: Has management identified current risks to the organization and implemented proper mitigation strategies?
Data classification: Has management identified all critical data and its forms, and addressed the protection of this data in the risk-assessment process?
Compliance Compliance was the second biggest area of concern, identified by 49 percent of respondents. It’s an area that continues to evolve as new regulators have been appointed to head the agencies that regulate the industry, and technological tools—dubbed regtech—have entered the marketplace.
More than half of survey respondents indicated that the introduction of regtech has increased their banks’ compliance budgets, demonstrating that the cost of solutions and staff to evaluate, deploy and support these efforts in an effective manner is a growing challenge.
Because the volume of available data and the ability to analyze that data continues to grow, respondents may have felt this technology should have effectively decreased the cost of operating a robust compliance program.
Executives looking to decrease costs may want to consider the staffing required to operate a compliance program and whether deploying technology would allow for fewer personnel. When technology is properly used and standards are developed to help guarantee efficient use of it, the dilemma of acquiring technology versus adding staff can often be more easily solved.
Strategic Risk Strategic risk was the third largest area for concern, identified by 38 percent of respondents. Many directors and executives are wrestling with what the future holds for their institutions. The debate often boils down to one question: Should they continue to build branches or invest more in technology—either on their own or by partnering with fintech companies?
Fintech companies are a growing player in lending and payments segments, areas that were historically handled exclusively by traditional institutions. That, coupled with clients who no longer value personal relationships and instead prioritize being able to immediately access services via their devices, increases the pressure to deliver services via technology channels.
Financial institutions have entered what many would call a perfect storm. Every institution will need to make hard decisions about how to address these issues in a way that facilitates growth.
Assurance, tax, and consulting offered through Moss Adams LLP. Wealth management offered through Moss Adams Wealth Advisors LLC. Investment banking offered through Moss Adams Capital LLC.
The rise of financial technology, or fintech, has not disrupted banks to the extent that many predicted it would. What it has done, however, is chip away at the number of services a given customer will seek from their bank. Instead of using their banking app to check balances and transfer funds, many use third party personal budgeting tools like Mint and peer-to-peer (P2P) payment apps like Venmo. Instead of seeking credit at their local branch, many consumers are turning to online lenders like SoFi. As customers spend less and less time engaging with their banks, brand loyalty is at risk, which is at a higher premium in today’s market.
So how can banks recapture engagement or retain loyalty? Adding an insurance offering could be an option for creating a new touchpoint with bank customers. To many bankers, this is not a new idea. The concept of bancassurance—where a bank serves as an insurance broker and directly offers products to its customers—has been around for a long time. But there is a wave of technological transformation taking place in the insurance space that could breathe new life into bank/insurance partnerships: insurtech.
Insurtech is very similar to fintech. At the core, these firms are about utilizing technology and data to shake up an incumbent industry. The end goal of insurtech is offering more targeted, consumer-centric insurance products and ways of accessing those products. Insurtech is still in the early stages of development but, according to customer experience technology firm, Quadient, most incumbent insurance firms now have a “strong plan or strategy for how they will deal with onboarding innovative technologies and channels” that they did not have just two or three years ago.
Banks utilize a few key models for incorporating insurance into their customer offerings:
Building a marketplace: The marketplace model is being pioneered by many digital-only challenger banks. For example, U.K.-based challenger banks Starling Bank and Monzo have rolled out in-app marketplaces that augment their basic checking accounts by linking customers to a bevy of outside partners, from insurance and pension providers to mortgage lenders. While it’s possible to generate referral fee income from this type of arrangement, this model has not proven to be a major revenue driver, as the banks have yet to see a month without losses.
The marketplace model does allow digital banks to offer services beyond their basic online consumer accounts without the stress of integrations and new partnerships, but that’s a challenge that most traditional banks do not face because they can typically offer payment transfers, loans, and more. While a marketplace would move incumbents closer to the Amazon-like platform model in vogue today, it doesn’t seem to offer a major value add for traditional banks.
Using white-label products: Taking the idea of an insurance marketplace a bit further, banks can also consider incorporating white-label products to help consumers access insurance or compare policies in the bank’s existing online platform. Fidor Bank, a digital institution out of Germany, created an online marketplace that allows customers to access curated fintech and insurtech products. The Fidor product, FinanceBay, is now available as a white-label product to other banks.
Many digital-first insurance providers offer ready-made affinity programs with white-label capability as well. With this increased connection between the bank and the third party insurance providers, though, liability becomes a much larger concern.
“Bancassurance,” or partnering to establish an insurance brokerage: A step even further than incorporating a white-label product to help customers find insurance would be to engage in a bancassurance model, where the bank would serve as an insurance broker actively selling insurance products to its banking clients. This form of partnership has been utilized heavily in countries such as France and Spain.
When Glass Steagal was repealed in 1999, those bank/nonbank commerce barriers were largely removed, but regulations, complicated corporate structuring questions and mixed results have largely kept the model out of the U.S. However, the recent partnership announced between Germany’s largest bank, Deutsche, and Berlin-based Friendsurance is bringing interest in this model back to the forefront.
By mid-2018, Deutsche plans to offer coverage from over 170 German insurers through its in-app insurance manager function, according to Insurance Journal. Friendsurance uses artificial intelligence to evaluate potential plans based not only on price but also on “the question of how financially stable the insurer is or how good its customer service is,” Friendsurance co-founder Tim Kunde told Handelsblatt Global in January. Deutsche will be establishing its own insurance brokerage firm run by Friendsurance as opposed to a simple referral program or marketplace tool. This differentiation, the bank hopes, will reinvigorate the bancassurance concept thanks to the added value the insurtech brings to the insurance buying experience.
However a bank/insurtech partnership takes shape, liability is a looming issue. The more deeply engrained a partnership is, the more complicated the liability analysis becomes. As with all major technology partnerships, banks should bring their regulators into the conversation early on if they’re considering a partnership with an insurtech provider.
Insurtech is a fast-growing sector, and the distribution of insurance products is becoming more prolific among retailers, utilities, lifestyle brands and more. If banks don’t begin to explore insurance partnership models, they may lose out on yet another opportunity to service their customers.
As it evolves, regtech is uniquely poised to save banks time and money in their compliance efforts, and has become a common topic for many in the banking industry. If you’re ready to realize the promise of regtech at your institution, here are a few key steps to take before you start parsing through providers or sending out requests for proposals.
Consider changes to your organizational structure that would place oversight of both legal and compliance transformations under one department. In Burnmark’s RegTech 2.0 report, Chee Kin Lam, the group head of legal, compliance and secretariat for DBS Bank, pointed to his authority over both legal and compliance functions and budgets as a key to the Singapore-based bank’s ability to work with regtech companies.
At first blush, a change to your bank’s internal structure seems like an extreme measure for a precursor to a technology pilot, but that perception misses the big-picture implications of implementing a new regtech solution. If a bank intends to engage meaningfully with regtech, Lam pointed out, there’s a need for an overarching framework for onboarding new technologies to make sure they “speak to each other at a legal/compliance level instead of at an individual function level—e.g. control room, trade surveillance, AML surveillance and so on.”
What’s more, legal and compliance functions are already tied closely together, and any regtech solution would likely impact both areas of the bank. Central management of these two functions can help ensure efficient regtech implementation.
Create a solid, detailed problem statement before you ever look for a solution. Lam suggests identifying the top legal and compliance risks your bank is facing, and working from there to identify pain points for your employees and customers when they interact with that risk area. One way to go about this process is to utilize design thinking, which looks at products and experiences from the point of view of the customers and employees who utilize them.
By seeking out pain points and working through the design-thinking process to find their root cause, bank leadership can identify specific, actionable areas for improvement. As tempting as it can be for an institution to attempt a total overhaul of its regulatory processes, banks should pursue modular regtech solutions to solve specific, defined problem statements instead. As Peter Lancos, CEO and co-founder of Exate Technology, points out in RegTech 2.0, “[f]ragmentation makes a regulatory strategy impossible—especially due to geographic spread and banks having separate teams set up to deal with individual regulations.”
Leverage outside expertise. The risks of implementing regtech can be daunting, so bank leaders need to use every tool in their arsenal to get deployment right. Banks should involve regulators in the conversation early on in the process of working with a regtech company. According to Jonathan Frieder of Accenture in The Growing Need for RegTech, “[r]egulators globally have continued to accept and, ultimately, to embrace regtech” making 2018 “a pivotal year.”
In addition to getting regulators on board, banks should consider enlisting outside assistance from consultants or other regulatory experts. Such experts provide assistance with assessing problem statements or potential regtech vendors. Lancos states that he feels “it is essential for banks to have regulatory expertise support to actually write the rules that go into the rules engine of regtech solutions.”
Regtech implementation is a lot more involved than an average plug-and-play fintech product. However, when a bank considers the cost efficiencies, improved compliance record and decreased customer and employee frustration, the upside of regtech can be well worth the planning it requires.
How can community banks choose the right path to ensure that their institution stays relevant in this era of technological change? In this video, Kevin Riley, president and CEO of $12 billion asset First Interstate BancSystem, shares with Barbara Rehm of Promontory Interfinancial Network how his bank is focusing on investments in its digital platform, and how he expects the financial industry to change in the near future.
This is the third in a five-part series that examines the bank M&A market from the perspective of five attendees at Bank Director’s Acquire or Be Acquired conference, which occurred in late January at the Arizona Biltmore resort in Phoenix.
If you have seen as many cycles in the bank industry as Eugene Ludwig, founder and CEO of Promontory Financial Group and a former comptroller of the currency, you know the time to be most vigilant is not when things seem bleak, but instead when things seems brilliant.
“The one thing I’m certain of is that the good times may go on for a year, two years, five years, seven years, but they will not go on forever,” says Ludwig. “Those folks that continue to be disciplined…will make it through good times and have advantages in bad times. Those that are imprudent will be gone.”
Ludwig made this point while attending Bank Director’s most recent Acquire or Be Acquired conference held earlier this year at the Arizona Biltmore resort in Phoenix. Ludwig’s perspective on banking and the M&A landscape is one of five that Bank Director has solicited from attendees at the annual conference.
“We’re obviously in good times,” says Ludwig. “The general spirit of the community banking session I popped into was upbeat and optimistic. Also, as Marshall McLuhan said, ‘The message is in the medium.’ The medium here is the size of the audience—1,100 people. Audiences tend to slim out in tough times. Having said that, I think people are sober about the challenges the banking industry faces.”
When Ludwig talks about the challenges banks confront, the first thing he talks about is technology, “both accepting new technologies and being able to utilize them effectively on one hand and also not losing customers to new entrants in the marketplace on the other hand.”
One upside for community banks, says Ludwig, is that they seem to be less vulnerable than regional and money center banks to the threat posed by the largest technology companies with the deepest pockets.
“I think Amazon and Google most likely will be more threatening to the mid- and large-sized institutions than the small ones—though still very threatening because the consumer loan business, where they will focus, is fundamentally not a community bank business or even a particularly regional bank business,” says Ludwig. “That’s a big bank business or specialty lender business.”
The same is true on the liability side of the balance sheet, says Ludwig. “The heart of community banking is core deposits and deposit-taking. As a big commercial entity, it’s still perhaps less likely that Amazon is able to get a bank charter with access to deposit insurance so it’s at a disadvantage in terms of core deposits and having a full suite of banking services the way banks do. If Amazon does get a charter, or the equivalent, then the community bank still—at least for a time—has community feel and touch and personal ties that will prove highly beneficial to it compared to other deposit gatherers.”
In addition to technology, discussions about the state of the M&A market obviously loomed large at this year’s Acquire or Be Acquired conference. Ludwig agrees with other industry observers who have characterized the current M&A activity as lukewarm.
“It is one of those promises of things to come that for a long time hasn’t come,” says Ludwig. “There is of course M&A activity, but there has been a belief among some that there would be an explosion in activity and that hasn’t happened.”
Ludwig’s comments echo those of fellow conference attendee Kirk Wycoff, managing partner of Patriot Financial Partners, a private equity firm based in Philadelphia. An average of 4 percent of banks enter into mergers or acquisitions each year, notes Wycoff in an interview with Bank Director. There is variation from year to year, but it tends to be on the margin and the absolute number of transactions should trend lower as the industry consolidates.
Ludwig points to two reasons for what seems to be the recent and modest lull in M&A activity. First, with bank valuations at their highest level in a decade, deals continue to look expensive in many parts of the country. And on a more granular basis, Ludwig notes “there is less differentiation among valuations within the industry than one would expect” given the differences among bank franchises. “Having said that, every now and then, this can also produce profound opportunity because individual institutions hit air pockets or run out of management gas,” he says. “So there are definite opportunities in the marketplace.”
The thing to watch in this regard is the quality of a bank’s deposit franchise. “If you run bank valuations in the community banking sector, and I’ve owned a couple in my time, it’s all about the deposits,” says Ludwig.
“I think that we’re getting into an era where deposit funding will be at a premium,” Ludwig continues. “When we started Promontory Interfinancial Network in 2001, banks were crying for deposits, [unlike] the last few years. (Editor’s note: Ludwig was one of Promontory Interfinancial Network’s founders and currently serves as chairman of the board, although the companies operate independently. Ludwig sold Promontory Financial Group to IBM Corp. in 2016 and continues as its CEO.) It may not go back to that, but it could. One thing true of banking and finance is that it’s cyclical. As Mark Twain said: ‘History may not repeat itself, but it rhymes.’”
In one sense, regtech—a recent word invention that stands for regulatory technology—is just a rebranding of an evolutionary process that has been going on for decades. Ever since the first IBM mainframe computers rolled off the assembly line in the 1960s, banks have been deploying technology to improve the efficiency and effectiveness of their operations and lower their costs. Of course, technology has come a long way since the dawn of the IBM mainframe—or “Big Iron” as they were sometimes called. Consider for a moment that anyone walking around today with an Apple iPhone 8 has more computer power in the palm of their hand than the Apollo 11 astronauts used on their 238,900-mile journey to the moon.
Another example—one with the potential to revolutionize the task of regulatory compliance—is artificial intelligence, or AI. “People see it as something that can solve all of your problems,” Harshad Pitkar, a partner at the consulting firm PricewaterhouseCoopers, said during a presentation at Bank Director’s The Reality of Regtech event, which took place April 18 at the Nasdaq MarketSite in New York.
While it holds great promise, Pitkar said deployment of AI in the regulatory compliance space needs time to mature, with more focus on building on “practical applications” that address specific compliance challenges within the bank. Pitkar also cautioned that like many complex technology solutions, AI projects take time and patience to get off the ground. “[They’re] not so easy to implement,” he said. “It’s not as easy as turning on a switch.”
It is still unclear however, how regulators will embrace technology-driven compliance solutions. Concepts and emerging technologies like AI in oversight of the compliance process are taken very seriously.
Regulators are by nature conservative, so it shouldn’t be surprising they may be slow to warm up to an innovative new technology solution proposed to replace a more manual, people-driven process they are very familiar with. At the same time, financial regulators are well aware of the many innovations emerging in regtech and financial technology generally—and the need for them to keep pace with this innovation. A number of regulatory agencies around the world, including a few in the United States, are establishing “reglabs” or “regulatory sandboxes” to test new ideas.
James Kim, an attorney with Ballard Spahr and a former regulator at the Consumer Financial Protection Bureau, said during a later panel discussion that banks should make a concerted effort to educate their supervisory agencies about regtech projects they have undertaken. “Educate your regulators,” Kim said. “They need to feel comfortable that your new technological systems are effective.” Speaking from experience, Kim said regulators will always be playing catch with the banking and fintech communities as the innovation tide rolls on. “They probably will always be dead last in having the expert knowledge in this area,” he said. “They need to be led.”
Fintech is prominent in today’s business lexicon, having migrated from the back office to a prominent position in both consumer and commercial finance. Its core functionality on mobile devices and wide application in artificial intelligence (AI) spans blockchain, smart contracts, banking, insurance, regulation and cybersecurity. And Amazon Web Services (AWS), a major cloud player, is the go-to provider for small and mid-sized businesses.
AWS delivers internet-based, on-demand computing, servers, storage, remote computing, mobile development and security, and a host of other information technology (IT) resources, all on a pay-as-you-go basis. Companies can gain unfettered, rapid access to low-cost, flexible services, with no up-front investment in hardware, software consulting and design, or expensive-to-maintain data centers. Companies can operate faster, more securely and less expensively, preserving their most valuable resources: time and money. And it is user-friendly—the AWS Management Console is simple, intuitive and accessible on the web or through the AWS Console mobile app. Wide adoption means lower costs from economies of scale.
AWS has mushroomed since its introduction a decade ago—posting $5.1 billion in revenue for fourth quarter 2017 and a 44.6 percent increase in year-over-year sales. AWS’ business model enables financial services firms and banks to scale up and down with increasing speed and agility. They can target new market segments, such as millennials—the fastest-growing consumer base—instantly, and easily offer an uncomplicated, compelling and accessible banking experience, appealing to a broad range of customers anywhere in the world.
Users’ traditional security concerns are assuaged with the AWS infrastructure, which aligns with best security practices, including SOC 1 and SOC 2 assurances. Third-party attestations and helpful white papers are available at its AWS Security Center at aws.amazon.com. AWS’ reliable development environment supports establishing a firewall via separate accounts for development and production. Thus, companies can try new features, conduct product experiments and perform user acceptance testing (UAT) without compromising the integrity of existing applications or disrupting active operations.
Although AWS offers quick, easy and simple solutions, users need assurance of adequate controls to protect the underlying database. Company decision makers must clarify who controls the data and how security is managed before migrating their data. Minimum precautionary measures include encrypting data, limiting the amount of data stored and insisting on multifactor authentication. Data ownership is a murky issue with AWS, and companies’ data could be mined to gain a competitive advantage.
AWS fintech customers should understand that segregation of duties is paramount. Oftentimes, small organizations have a chief technology officer who is also responsible for development, design and support. These multiple duties can create a control issue. Additionally, fintech companies may not have clearly defined production schedules, so they often make changes during the day. Segregating the production from the development environment mitigates the risk of unauthorized changes.
The overarching issue of regulation is major. The Financial Stability Board, an international body that monitors the global financial system, highlights 10 issues that supervisors and regulators must heed, and three have top priority. First is an oversight structure to govern third-party service providers, including cloud computing and data services. Second is mitigating cyber risks by maintaining contingency plans for cyberattacks and focusing on cybersecurity when designing IT systems. Third is monitoring macro financial risks against undue concentration and large and unstable funding flows.
These top issues have particular application to fintech, where traditional risk management functions may not suffice. Blockchain and robotics technologies demand a risk management framework that examines underlying assumptions, revises risk tolerance levels and acceptable risks, and increases stress testing and simulations.
AWS has earned a solid reputation in the marketplace—it is more than 10 times the size of its nearest competitor—and its prominence will increase. Small and medium-sized businesses have championed its ease of use, cost savings and scalability. However, they must protect data and avert potential operational risk.
As global businesses and markets are caught in a seemingly perpetual cycle of disruption and adjustment, company leadership and directors are tasked with finding new, innovative ways of communicating and working with shareholders in an increasingly complex and fragmented landscape. This is even more important given the massive technological advancements within the last decade, which have not only shifted the ways in which companies operate, but the means in which businesses and investors convey and share information.
Recent advancements in technology have transformed everyday business processes through digitization, which, in turn, has made cybersecurity a top priority. Moreover, they have made the world a much more connected place, facilitating business at a faster pace than ever before. To help company leadership adjust, new technologies have been developed to help directors and leadership teams improve collaboration and workflow.
Digitization Today’s boards are going paperless, and the reality has become indisputable: directors are turning away from printed documents in favor of digital information that is easy to share and accessible on mobile platforms, like board portals.
Through digitization, directors are now accustomed to heightened levels of speed and efficiency across all business processes. With board portals, corporate secretaries and meeting managers are able to streamline board book creation and tighten information security. The benefits to this technology are clear: easy access to digital meeting information with user-friendly tools for assigning tasks, approvals, consent votes and secure messaging.
We have also observed a growing trend driving increased global demand for board portal solutions: the need to collaborate and share confidential information and documents across internal and external teams in a highly secured environment. The C-suite executives who already use our board portal tools for director-level collaboration are now expanding that capability across their organizations, all through a single sign-on service.
Cybersecurity As businesses shift to digital platforms, data security plays a much bigger role. Companies must closely scrutinize how sensitive information is handled due to the risk of breaches. Cyberattacks are common and can result in significant financial and reputational damage; cybercrime damage costs are expected to total $6 trillion annually by 2021, according to CSO. This makes it especially important for boards and company leadership to take a strategic approach to data protection. Information is being shared in more rapid and innovative formats, and the methods in which boards communicate with shareholders will need to prioritize safety along with accessibility.
Protecting sensitive information should be at the top of a company’s concerns. This is why solutions should comply with strict encryption standards, multi-factor authentication and a completely cloud-less data storage system. Companies can also leverage machine learning and artificial intelligence (AI) to navigate and secure large volumes of data. These technologies can monitor and detect network anomalies that signal potential attacks and prevent further access before data is compromised.
Globalization Due to the digitization of communication channels, we are now able to connect and do business in seconds with people halfway across the world. As technology brings us closer together, it breaks barriers to information accessibility. This ease of information exchange has impacted investing by virtually removing any impediments that once stood in the way of certain markets.
Increased ease of access to information around the world means companies, and particularly company leadership, should ensure key information is digestible for all stakeholders. That’s why being equipped with full translation services for common languages can be advantageous.
Moreover, as globalization continues to facilitate business and investing opportunities, shareholder bases are broader and more diverse than ever before. With the rise of passive investing, companies lack a level of transparency that allows them to know who their stakeholders are. For this reason, it is necessary to take advantage of tools and technologies that provide actionable insights into passive investment data and provide a more comprehensive picture of shareholders.
Looking Ahead As technology continues to augment the ways in which companies operate, boards need to keep pace, ensuring they are communicating with their shareholders in the most efficient and preferred methods possible.