IT Technology Risks
What are the different IT technology risks in financial services?
Think of technology as the beating heart of financial services and the digital revolution as the life force coursing through the sector.
Financial services institutions are increasingly realizing the risks of adopting technology. It is, therefore, imperative for the companies to assess, prioritize, and manage risks.
After all, the threat of cyberattacks is increasing by the day. At $18 million per company, cyberattacks cost financial services companies more to address than firms in any other industry.
Shockingly, firms in this financial services sector are 300 times more targeted in cyberattacks than businesses in other industries. Within the sector, banks lost a whopping $16.8 billion to cybercriminals.
Clearly, there is a need to address security loopholes in the IT infrastructure. But what are the other risks that financial services firms face? Let’s discuss them one by one:
- Ineffective IT strategy: Companies often choose to watch new technologies evolve instead of embracing them. They, on the other hand, should balance the risk of adopting new technology and waiting for things to settle down or ignoring the technology outright. There may also be a misalignment between business and IT strategies. This could lead to unnecessary investments and unfulfilled expectations.
- Outmoded technology: Financial institutions continue to struggle with phasing out legacy technologies such as applications, datacenters, and platforms. Increasing the complexity and costs are technologies that cater to specific audiences, select geographies, customized products, and enterprise-centric processes. Multiply this by hundreds or thousands of applications and you will see complexity that is simply too difficult to address.
- Inorganic growth: Mergers and acquisitions lead to a growth in applications even when the management of financial services companies continues to focus on short-term goals like containing costs rather than upgrading and simplifying the IT landscape. In certain cases, companies may have to make large investments to align IT processes and applications.
- IT continuity and resiliency: IT organizations must be resilient to outages and disruptions to enable technology to help perform every activity. These organizations should perform recovery testing — mostly for critical technology — to ensure that their recovery plans will work.
- Third-party risks: The financial services industry has seen the emergence of multiple third parties, JV partners, vendors, and service providers which, in turn, raises the risks. Third-party technology may jeopardize the reputation, financial standing, and other facets of a business. Financial services institutions must get together to formulate rules for thorough due diligence and monitoring procedures for all third parties, including the ones engaged by IT.
HCLTech, with their domain competencies across retail and corporate banking, insurance, and capital markets, is perfectly poised to help financial services companies address the abovementioned challenges. The company’s long-term customer relationships and strategic alliance with global financial services organizations have helped it craft solutions for financial services.