Risk management in banking has never been more complex than it is today. The past decade brought with it a global financial crisis, banking scandals, technological advancements, and much more. All of this has contributed to tightened regulations and increased compliance on a worldwide scale.
The operational risks that banks have to juggle are as relevant as ever before in 2024, and it’s important to know exactly what these are so that your bank can take steps to prepare employees to deal with them, thus avoiding the costly pitfalls that it could be so easy to fall into.
So, what exactly are the biggest operational risks banks are facing in 2024?
While most banks already consider cybersecurity an absolute priority, it is important to remain vigilant and on the front foot as this threat will only increase and become more and more difficult to fend off as technology continues to develop.
This is especially relevant when we consider the fact that banks now store more data than ever before about their customers.
An example of how important this issue is can be seen in a report issued by Deloitte that revealed that “...financial services institutions on average spend 10.1 per cent of their IT budget on cybersecurity. Yet, the number of data breaches in the first six months of 2019 increased by 54 per cent over the same period in 2018.”
In light of this, it is crucial that banks take necessary steps to ensure that their leaders and employees have training programmes in place that can help them to identify and combat the operational risks associated with cybersecurity, such as hacking, employee errors and GDPR breaches.
Following the 2008 financial crisis, regulations were put in place by governments across the globe to prevent it from happening again. Public tolerance for banking failures also fell dramatically and mistrust rose, which put pressure on the authorities to implement a fresh wave of strict regulations.
The problem that this poses for banking employees is that the sheer speed and volume at which new regulations are being introduced can be difficult to keep up with, especially when placed alongside their day to day responsibilities. This increases the risk of banks operating outside of regulations as well as having a workforce that feels confused about what regulations they need to adhere to.
The answer to this is to ensure that individuals are adequately trained in the latest banking regulations, and have an understanding of how these regulations affect wider operations. This will equip employees not only with the information that they need but also the confidence to make key decisions quickly and without delays that could prove costly in the long run.
The onward march of technology has always affected banks as well as the operational risks that they have been faced with. This is more true than ever in 2024, as banks are exposed more and more to technological advancements such as big data, machine learning and online banking apps.
While technical advancements in the banking sector such as these are helping banks to reduce their costs, increase profits, and provide a more seamless customer experience; there are also new operational risks that come hand in hand with these changes - such as data privacy and protection.
By training staff on an ongoing basis about the operational risks that go alongside with new technology that is being implemented, banks can ensure that individuals have a thorough understanding of the challenges that these technologies represent. This, in turn, lowers the risk of any issues arising that could put the bank in legal trouble or cost a large amount of money to rectify.
The rise in operational risks that we are seeing in 2024, and in the future, are making it more important than ever that banks ensure that their staff have up-to-date knowledge by utilising training courses that can prepare them to manage risk within their roles.
Here at MDA Training, we offer industry-leading training programmes for the banking sector that are specifically designed to help individuals to retain information, and apply the information that they learn in real-life situations related to operational risks.