As one of the most regulated industries in the world, banks are under pressure to not only comply with constantly changing regulations but also to modernize their systems, so that they can reduce compliance costs, improve efficiency and effectiveness in risk management processes, stay competitive in the age of the FinTech, and innovate on risk assessments during new product development, to better serve their customers.
However, it appears banks in Africa may face more huddles as a result of current technology developments and experts in the ICT sector are saying the only way out would be for the banks to train and retrain their staff in order to stay ahead of time.
They also advocate adoption of new technology trends to be able to compete in the global stage. Speaking at the SAS Risk & Finance Analytics Roadshow in Lagos, Senior Business Solutions Manager, Pre-Sales Risk Practice, SAS, Mr Charles Nyamuzinga said banks in Africa face additional challenges, including risk analytics skills shortages, data management issues and integrating risk management and finance processes across the enterprise.
He however said that on the positive side, they have started considering technology as a way of eliminating these challenges and have access to new streams of data that are also helping to advance the financial inclusion mandate.
According to him, “there’s a good chance that banks in Africa could get this wrong if they use disparate and fragmented systems for data management, model building and implementation and reporting – which is often the case – or if they try to do the computations manually. Accurate modelling and calculations is critical in credit scoring, estimation of credit losses, calculation of risk weighted assets and stress testing.
It depends on all departments in the bank having access to the same clean, accurate data and a flexible integrated risk management platform. It also depends on having access to data analytics skills, which is another common challenge among African banks.” he said.
He added that banks need to modernise and integrate their risk management systems if they hope to stay relevant in a rapidly changing market. “Compliance is no longer their single biggest consideration. Banks should also take into account cost reductions as well as high performance, efficiency and governance issues in risk and compliance processes.
They need to adopt advanced analytics solutions that are multi-tenancy in terms of risk management use cases and cover the entire risk management process, from data management, risk analytics and reporting, to meeting governance and controls requirements. As with banks all over the world, banks in Africa are already expected to be compliant with the new IFRS 9 accounting standard, which changes the way they calculate expected credit losses. “
Another source of regulatory pressure banks are grappling with are the requirements, questions and challenges related to conducting stress tests, as the regulators become more stringent on stress testing processes. If either of these calculations, which are based on risk models, are incorrect, banks will not only have to worry about non-compliance penalties but also the capital shortfalls, reputational impact and negative impact on earnings performance.
SAS as a technological partner for banking institutions has always played a proactive role in fostering innovation and transformation of processes and systems, from regulatory compliance to strategic decisions support, from digitisation to risk assessment in real-time. Analytics solutions allow banks to adapt more quickly to regulatory changes minimising costs.