\ Financial Institutions Must Be Strategic In Pursuit of Digital Transformation
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Financial Institutions Must Be Strategic In Pursuit of Digital Transformation

By Kevin Murphy, President of ISACA Scottish Chapter

Blockchain, artificial intelligence, and quantum computing: the application of such technology has moved from the realm of science fiction to viable solutions for organizations around the world. But how well do business leaders understand this digital transformation? Who is best within your organisation to translate this technology into competitive advantage? And what key principles can help your organization take advantage of the digital world?

With the rise of 'fintech,' financial services organizations have been quick to identify (but slower to adopt) the opportunity of digital transformation. With an anticipated $46B to be spent on emerging technology prior to 2020, it is clear implementation of new technology will quickly become a reality. Whether it be artificial intelligence to improve investment decisions, machine learning to anticipate the effects of interest rates, or the use of big data analytics to assess the brand value of a bank on social media, it is evident the next generation of banking shall bear little resemblance to what we have today.

The concept of open banking which allows a customer to permit an authorized third party to analyze its banking data so it can provide new products and services is perhaps the best example of the challenges and pitfalls of digital transformation. Allowing customers to move and manage more efficiently, open banking also presents a significant challenge in how personal information is efficiently secured and ethically processed in this new multi-layered model. As a technology solution to enhance the customer experience, how can a financial institution be sure it had the correct blend of IT specialist, security professional, business stakeholder, customer ambassador and legal counsel to ensure this new way of working has reduced risk to an acceptable level and maximized the business opportunity?

ISACA's 2017 Digital Transformation Barometer research of more than 4,100 business technology professionals worldwide found that the emerging technologies that are the most transformational (big data, artificial intelligence, machine learning) also pose organizational challenges in terms of perceived risk and resistance to change. 

The main motivators for digital transformation focus on cost savings, identifying new revenue streams, and reaching new customers. But with only about half of respondents confident in their business leaders' digital literacy, the question can be asked: is the digital transformation process being led by the right people.

With the emphasis on digital rather than process, it is no surprise IT specialists, in conjunction with the executive, assume the greatest responsibility for evaluating and adopting emerging technology. Remarkably, however, the business that group of people predominantly responsible for customer engagement and delivery were found to be primarily responsible for evaluating new technology in less than 10% of instances. 

Business need, managing organizational risk, and ensuring return on investment were critical decision factors in an organization adopting emerging technology. Left solely to the executive/IT specialists, it is questionable whether the integration of emerging technology shall effectively enhance business requirements or improve customer engagement.

To maximize return on investment of time, cost and resources, it is clear the following principles should guide any organization that is in the process of adopting new technology:

  • Validate staff have the existing expertise to evaluate and implement the technology solution;
  • Ensure any technology investment is based on a business case that clearly articulates a business need;
  • Data analytics should only be investigated after the business requirement to automate/enhance business decision-making processes have been identified;
  • Project costs should influence ongoing support, maintenance, and training of staff;
  • Assess all ethical considerations for both customers and employees. For example, all privacy implications for the use of personal information through the data life cycle must be transparent, proportionate and fair.

Ultimately, effective digital transformation will depend on the mindset of those individuals within an organization who are responsible for selecting, implementing and using emerging technology. The identification of business requirements, understanding how technology can meet the business need, and crucially assessing how this new technology will enhance the cultural expectations of customers will dictate who successfully transitions to this brave new world.

Kevin Murphy, CISM CRISC CISSP CIPM CEH ISO27001 LLB DipPSLM MA (Hons), is an internationally award winning cyber security consultant. He is President of the ISACA Scottish Chapter and Vice-President of ISC2 (Scotland). His previous cyber security experience includes eight years as a police officer, where he was awarded a chief constable's commendation and then leading member of KPMG's award winning cyber security team. Murphy has authored two books on training and development and now works for a global bank as a cyber security, risk and privacy specialist. Murphy is a noted speaker on the international security circuit and a regular contributor to leading cybersecurity, risk, and privacy publications.

Related Keywords:Digital Transformation, Blockchain, artificial intelligence, quantum computing

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