"Once you start uncovering and going a little bit deeper, that's when you're going to find the risks that pose challenges to you hitting your objectives.”  -Amanda Cohen

Risk management is one of those boring but necessary business topics. It’s like a guest at a cocktail party who shows up in sweatpants but has a fascinating story to add to the conversation.

James Robert Lay always welcomes lively discussions about the topic of risk management at financial brands. He recently discussed this topic with Amanda Cohen, the director of GRC products at the global risk management transformation company Resolver.

The Inherent Tension of Risk Management at Banks and Credit Unions

Risk management comes with activities that make most of us bristle - things like audits, compliance, and updating our complex company strategic plans. I don't know many people who wake up in the morning and say, “Hooray! It’s time for some risk management!”

But it’s one of the most valuable activities a company can ever engage in. Risk management adds security, clarity, and the confidence to move forward boldly and accomplish a company’s mission. When handled properly, risk management can even remove barriers to innovation and open up a new world of digital transformation.

Meanwhile, there’s a built-in tension between teams that are trying to accomplish new things and the company’s risk managers. There’s a constant push-and-pull where it seems that they’re always competing with each other, seeking different goals, and setting different priorities.

Amanda believes it’s important for each side to try to understand the other’s values more clearly and work together more meaningfully. Take a step back from the day-to-day tension and ask, “What are we trying to achieve together?”

This is a challenging task. The innovators in the organization may feel hamstrung by a compliance team that’s always sending them back to square one. They make progress and feel that they’re just on the verge of doing something new, then suddenly compliance sends them back to the drawing table to address numerous things they’ve missed.

The secret to resolving the tension is working together throughout the entire process. Compliance should be involved at the beginning, not the end. Get ahead of the challenges and build compliance right into your new product lines, services, and so forth. This helps everything go more smoothly, supporting innovation and transformation.

The Role of Risk Intelligence

Risk intelligence goes a step beyond risk management, allowing a financial brand to act strategically while minimizing risk. It’s a way of gathering information and asking questions far in advance, preventing issues from arising as the company moves forward with its initiatives.

Here’s something to think about when it comes to risk intelligence: Your risk data lives everywhere. It’s in your people, your assets, your acquisitions, your activities, and anything the company is evaluating. Amanda says this presents an enormous challenge in terms of feeding data intelligently into your risk program.

Having insights and analytics that make sense boils down to taking a holistic view. Bring together as many sources of data as possible and work with the data until you’re building a holistic picture of your situation. This is the best way to gain insight into what’s happening now, plus foresight into the future.

Don’t Get Stuck on Cyber Risks

Risk management naturally comes with plenty of unknowns and threats from many corners of the business world. But if you ask the top managers of a company, “What are your top risks?” most of them will probably point to cyber risks. These types of risks tend to be top of mind.

This shows why it’s important to pivot the question and instead of examining top risks, consider the least-controlled risks to your organization and within it. This creates a different conversation.

For example, imagine working for a fintech company. You know many of your top risks are cyber risks because you work in tech. But if you cast a wider net and look at your least-controlled risks, you’ll realize that partnerships and third-party arrangements are actually among your biggest risks.

What about points of failure? A sudden acquisition? What if a key executive at your company leaves? These aren’t always fun things to think about, but ignore them at your company’s peril. The companies that will survive the financial world of the future are the ones who engage in savvy risk management today.

Risk Management as a Growth Strategy

Research shows that up to 85% of financial brands lack a well-defined digital growth strategy. Many of them are simply dabbling in digital, trying small things without having a cohesive overall plan for pursuing true digital transformation. Guess what? This is a risky move. 

Operating in the digital space isn’t something that can be done tentatively. In fact, digital dabbling usually leads to dwindling resources for marketing and advertising because the company is throwing away so much money on a million little projects.

Instead, develop a clear target for bold digital transformation. Establish your company’s tolerance from a risk perspective, then shoot for the target in a bold and meaningful way. Don’t allow small, day-to-day issues to distract you from the target. Don’t allow it to become deprioritized.

Aligning Your Marketing Messages Across Channels 

Amanda has also seen too many companies miss the mark because they can’t align their marketing messages across channels. They have certain messaging on their website that’s a mismatch for their service advertisements, which is totally different from what their salespeople are saying, and on and on.

When there’s no message alignment, it’s a missed opportunity for building awareness. There’s an old marketing adage that a consumer must see your message 7 times before they remember it. It’s still true because it’s buried deep in our human psychology.

Align your messages, build awareness through repetition, and focus on value. Instead of pitching the features, show the customer what kind of value they’ll get from your services and how it could transform their life. Encourage them to make a selfish decision to improve their life with your products/services.

Make sure your sales staff’s messaging is entirely aligned with the rest of your marketing. They’re working at the front lines of making an impression on your community and the world. They guide people into the buying journey and are responsible for setting up the message that is later handed off to other aspects of your multi-channel communications.

From Awareness to Action

Most companies have some level of risk awareness. But it’s challenging to move past the awareness stage and take action on risk management in a way that’s meaningful and supports - rather than stifles - innovation.

Feedback helps move your company and people out of the awareness stage and toward taking action. Look at your company’s online reviews and examine how they’ve changed (or not changed) as you’ve introduced new products and services. 

What trends are you seeing? What’s more positive than you expected? What’s more negative than you’re willing to accept? What aren’t you seeing that you’d hoped to see? What’s slipping through the cracks?

Now add metrics to this feedback. Turn it into actual data that can be tracked and analyzed by your organization and develop the mechanisms to continue gathering and analyzing the same feedback over time. Otherwise, it will be meaningless because it’s not actionable.

From a risk management perspective, this is known as tracking key risk indicators. It allows you to understand your growth targets and leverage your risk intelligence. 

In plain language, it allows you to turn every bad review into a good plan. Every unhappy customer becomes an opportunity to refine your approach and succeed next time. 

Are You Adding or Eliminating Friction?

Amanda has noticed that many financial brands are making innovation harder on themselves by sticking with old, antiquated systems that add friction to transactions. This means every little interaction for every single customer is slow and frustrating. 

What can you do to make the experience less awful?

This simple question can actually be transformative for a financial brand. Oddly enough, the answers from customers are also usually quite simple. 

They want you to save their time. They want you to make forms shorter. They want you to respond to them faster. What’s not so simple is resolving these kinds of problems.

For example, customers might tell you they don’t want to have to enter their password twice online. Or they wish your website didn’t have so much text. Maybe they’re tired of checking a bunch of individual checkboxes and wish you’d just give them a “select all” option. These are such small and easy issues to resolve!

Unfortunately, many financial brands consider these friction-filled issues to be too small to bother with. As a result, their customers feel ignored and undervalued. These irritated customers are now eager to explore other, more exciting new fintech solutions that finally ease all of the friction.

Must-Haves in Risk Management

Some of the most important aspects of risk management are boring and happen behind closed doors. They involve preventing breaches, resolving complaints, spotting employee fraud, and even dealing with vandalism at your physical location. 

Don’t avoid the details because they’re boring. These kinds of details enrich your risk management data and tell a more robust and compelling story about your business.

What if you had exponentially more security breaches in a year when you also had exponentially more digital account signups? From a risk management perspective, you might decide that the success of building more account holders has been worth the downside of more security breaches. Next-level risk intelligence involves linking these two phenomena together and making an intelligent decision about the tolerable level of risk.

Another must-have in risk management is executive buy-in. It’s almost impossible to promote a new program when you don’t have support from the top. The executive team has to be willing to jump on the train and go full steam ahead.

Build buy-in at the top by providing fascinating and insightful information. Even when the news is bad, show how risk intelligence is giving your company the intel it needs to move forward with confidence.

Also, provide your executive team with trend and market information that illuminates their understanding. Did one of your major competitors have a giant fire at their headquarters? That could be valuable to know. Have you seen huge success among an unexpected customer group? Provide market trend data that helps explain it. Give them something to remember.

The Future of Risk Management at Financial Brands

Amanda is excited and hopeful about the future of fintechs. She’s seeing financial executives show excitement for the risk assessment process as they understand its potential.

She’s also seeing promise in the area of integrated risk, which brings diverse sources of data together to drive decision-making. Financial brands are increasingly using risk management data to provide on-the-ground information that helps their team members serve their customers more effectively.

Conducting risk management is non-negotiable for any financial business. What’s up for interpretation is how you do it. Approach it from a strategic and tactical perspective, and you’ll have the best possible chance of driving your company’s vision forward.