While you can’t predict every risk, you can feel more comfortable that you’ve prepared your business for what could go wrong.
Risk management is important no matter your industry, but it’s especially important in finance. When you’re dealing with both customer privacy and customers’ money, your financial risk management plan has to be especially buttoned up. It’s worth the investment in time and money to put a comprehensive plan together.
However, we won’t sugarcoat it—financial risk management can be complicated. As the finance industry continues to become more digital, it can create weak spots vulnerable to hackers or data leaks. Thankfully, risk management software offers benefits at every stage of your risk planning and management process so you can better protect your business.
3 benefits of risk management for the finance industry
A big part of risk management in finance is keeping track of all the information you need in one place. Missing critical regulatory deadlines can have a negative effect on your bottom line, and costly litigation due to missed details can tie up company resources for months, or even years. But don’t worry—risk management software can help you stay organized and manage multiple stakeholders and departments. We’ll share how software can help with each benefit listed below.
1. Protect yourself from expensive litigation related to data breaches
If your company is found negligent in a data or security breach, it could cost you significantly in litigation fees. On top of that, you could receive bad press that damages your company’s image and even reduces future revenue. A risk management plan helps protect your company so you can avoid excessive damages related to a data breach.
While security and data breaches have always been a threat, COVID-19 has made this type of issue even more of a concern. More remote work creates additional risk factors, such as the threat of phishing, malware, or data leakage.
This is where your risk management plan comes in—having a plan in place to minimize damage if any of these issues occurs can be crucial to saving your company additional expenses in insurance and litigation fees. Your risk management plan can include things such as establishing roles and responsibilities if a leak occurs and performing frequent checkups on your business to assess your data security preparedness.
How software can help
Risk management software has a risk identification feature that can help you identify, audit, and track each specific risk and keep your planning for each in one place. You can create your own repository or choose from pre-established risks.
Software also includes a risk assessment feature which allows you to score risks. Doing this type of risk analysis allows you to keep track of which risks specifically could affect your business, so you can then score them to create mitigation plans or crisis communication plans.
2. Avoid costly fines for not complying with regulations
Another benefit of risk management is avoiding fines for not complying with new or changing regulations.
The finance industry is heavily regulated and changes often. On top of that, the rise of online banking and fully digital companies has led to innovations that are making the industry more competitive. Financial institutions must innovate in order to stay in favor with consumers. Even if you aren’t intentionally violating requirements or bank policies, the fast pace of innovation could lead to a new product that unintentionally violates requirements.
A risk management process can help ensure your research and innovation, product, or marketing teams have a process in place to run any new features or products by your legal team.
How software can help
Risk management software typically includes regulatory compliance features. These features help ensure you’re meeting legal and regulatory compliance without missing deadlines or key information you need for compliance.
3. Create a culture of risk preparedness so there’s less room for error
Creating a culture of risk preparedness helps set your company up for success when it comes to financial risk management. With a culture of risk management, protecting the company doesn’t all fall onto the shoulders of a risk manager or risk management team—preparing for risks is everyone’s responsibility.
For example, if you train your employees on how phishing scams work, they can be diligent in spotting any warning signs in their inboxes. One popular scamming method involves using a higher-up’s name and title to try to convince employees to share sensitive data like account numbers. If each of your employees is trained to watch for these situations, then an astute employee can give your risk team a heads-up to alert others and prevent an unwitting or distracted employee from falling for this scam.
How software can help
Risk management often includes document management as a core feature. This allows you to store information and create a knowledge base for new employees to learn where risks may be lurking. Some applications also include mobile functionality so employees can upload images directly from their smartphone to illustrate risk issues.
Have a risk management strategy so crisis doesn’t take you by surprise
Especially in the era of COVID-19, as more financial transactions are conducted remotely and finance industry employees are working remotely, it’s incredibly important for finance institutions to make an investment in risk management. It’s likely that even after the pandemic, both consumer and employee expectations will shift to expect more remote financial capabilities.
This article is intended to inform our readers about business-related concerns in the United States. It is in no way intended to provide legal or financial advice or to endorse a specific course of action. For advice on your specific situation, consult your legal counsel, accountant, or financial consultant.
The applications selected in this article are examples to show a feature in context and are not intended as endorsements or recommendations. They have been obtained from sources believed to be reliable at the time of publication.