“Crummy IT” is a risk for more than just banks
A recent opinion piece in the Financial Times pointed out the difficulties that the biggest banks face after years of system consolidation (Why crummy bank IT is a looming regulatory risk, 15th March).
The real issue, in my opinion, is that it’s not just banks that suffer this problem, yet time and time again they are the only ones in the spotlight for it. Any industry with a mix of cloud and on-premises infrastructure (that won’t be replaced in the foreseeable future) has the same problem. From telecoms, insurance and healthcare companies to the public sector, aviation and retail – they all have a duty of service to their customers.
Banks in the spotlight
Of course, with banking troubles such as SVP and Credit Suisse, it is only natural for the spotlight to be on the banking sector. And, with ever-more complex systems, banks are vulnerable to IT failures that can cause eye-watering losses. For all banks, often when one thing goes wrong it reverberates throughout the entire IT stack, causing unexpected failures in services. These can cause failed trades or hedges, long outages to customers, or systemic market risk.
Banks do monitor their systems to identify and fix any issues quickly, but this becomes more difficult when a single transaction has multiple “hops.” Just one transaction has to go through on-premises legacy technology, applications, IT infrastructure, web servers and containers in the cloud – and more. By the time it gets to a mobile phone app, anything could have happened.
Fortunately, the UK regulator (and other regimes) continually push banks to update their systems and approach to these issues so that they just remain the problem of the bank, and not its customers. And with customers increasingly expecting to be able to do more, and do it now, they need to ensure they are catching up.
The latest survey from Risk.net said that regulatory compliance is “an increasing source of alarm for operational risk managers.” “It jumped to second place in this year’s survey of operational risks, up from tenth in the 2022 ranking – making it the fastest mover in the top 10,” said the report.
IT risk is everywhere, and not just in banks.
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