The Days of Deferring to the Board’s Tech Experts are Gone

December 2023

 

Ah, the good old days in bank board rooms… when banking and finance experts had the privilege of staying in their comfort zones, leaving the tech noise to board members with technological capabilities. Well, those days are over. Not only is it necessary for directors to be lingual in technology today, it is critical. Technology is no longer just a back-office department or a side show as it was in the past, but rather one of the main enablers of business strategy and a major risk to its survival.

Below are some of the many technology issues that all board members must be conversant in to both protect and grow a bank.

Cyber risk

There is no question that this remains the top risk and is what directors and executives fear most.

• Is the board meeting with the CISO often enough?
• Do we understand the risk and the extent of damage that a cyber-attack can have on our organization?
• Are we satisfied with the control program designed to manage the risk?
• Are we familiar enough and comfortable with the recovery and remediation plan for a cyber event, including regulatory disclosures and communications with stakeholders?

Core systems

• Are our core systems robust enough to support the level and speed of service that we currently need to provide and expect to provide in the future?
• Should we rebuild or modernize the underlying systems, and if so do we have a plan for that?
• Do we know how close we are to end of life of key systems?
• Have we asked to see alternative solutions?
• Are we reliant on limited and decreasing resources that are familiar with the coding languages?
• Is the core system structure (i.e., dozens of systems, databases and environments) negatively affecting our “go to market” capabilities?
• Are we reaching the “Kodak moment”—potentially missing a strategic, existential pivot?
• Are we listening to external experts as well?

Cloud

• What percentage of our systems are cloud based?
• Do we fully understand the risks and opportunities associated with cloud services?
• Are we able to improve speed and capabilities?
• Are we reliant on one cloud supplier?
• Should we also have private cloud?
• How much of our systems are still on prem and what are we doing to change that?

People

The digital revolution has changed the capabilities that are needed in today’s workforce.

• In addition to hiring new staff with the required resumes, are we evolving current workers who need to reskill and are we increasing employee satisfaction and loyalty?
• Is this priority on the agenda of our People (HR) strategy?
• Do we know what the current and ever-changing skill set is?
• Are we addressing key dependency risk?
• How diverse is our talent?

Data/AI

• How are we collecting, managing, and using the data that we have?
• Are we using automation to streamline our back-office processes?
• Are we maximizing our use of AI and GAI (Generative AI)?
• Have we defined our risks, opportunities, and appetite around this?
• Are we properly managing our outsourcing and privacy concerns around tech and data, including complying with all applicable laws and regulatory obligations?

Digital journey

There is no doubt that there is fierce competition around client satisfaction. Today’s client journey demands the highest level of personalization integrated into friendly interfaces, and without the right systems and use of data this isn’t achievable.

• Do we know whether our organization is falling behind our competitors in our digital offering?
• Are we creating internal automation as a result of the ubiquity of our external digital offering?
• Do we insist to set a KPI to measure our digital footprint?
• Are we combining enough human interaction to keep our clients happy and ensure retention?

Fintechs

• Are we familiar with all fintechs in the lending, payments, wealth management and other spaces?
• Did we map the competitors and opportunities?
• Are we building our solutions internally, acquiring, or partnering with fintechs?
• Are we fast enough to market?

XAAS (everything as a service)

• Are we considering outsourcing some of the non-efficient processes that are done internally?
• Can we increase our profitability and performance by using XAAS?
• Are we familiar with the technological solutions that are available?
• Can we use them safely at the level of trust that is required for a bank, including addressing third party risk?
• On the other hand, are we considering offering certain activities as services?
• Have we considered industry utilities?

In short, welcome to the new world of risk and opportunity. So, what can we do?

Here are some pointers on how to act responsibly in the digital age:

Board education. With the recent AI revolution, it has become clearer than ever that board education on technology is critical but it doesn’t stop with AI. We need to make sure that our board education program is relevant and that we are bringing the best of breed experts to lecture in our training to both support and challenge management.

Don’t be afraid to ask (it’s your responsibility). We too often see discussions that are not effective, either because one side of the dialogue didn’t understand, wasn’t prepared, or feared asking—or the other side wasn’t interested in explaining. A moment of showing that we don’t fully understand is worth being able to respond responsibly.

Learn from the board members with technological expertise. Although we shouldn’t blindly rely on the tech experts on the board, it is highly recommended to listen to their input, insights, and recommendations. They have the advantage that we should leverage and learn from.

Stay updated. We will all need to technologically reset ourselves on an ongoing basis. Find relevant focused newsletters, websites and training that will equip you with the ability to ask the right questions.  Constant learning is the only way to stay relevant. Ask your Bank/Company to recommend what the best ways are. Management is also interested in educating board members so that they can have more effective discussions.

Enjoy the rollercoaster ride—but buckle up and be prepared. The only thing that we can promise is that nothing will stay the same.

*Judd Caplain is the former Global Head of Financial Services at KPMG.