Why data is key to the operational resilience of the financial sector

How banks can use data to improve resilience and proactively adapt to change

In the face of geopolitical tensions, technology failures and increasing cyber risk, the financial sector must continue to evolve to remain resilient and able to adapt to shocks and disruptions in their operations. Because today, financial services firms are accountable for their end-to-end resilience and must exercise controls and governance to combat the threat of disruption, and the potential impact of it.

The acceleration of digitalisation, transformation, and new technologies, supported by collaboration with third parties, is introducing a new, complex threat landscape to the financial sector.
 

The financial sector operates in an increasingly interconnected market, with systemic risk a key consideration and driver for resilience. Firms must individually remain stable, to avoid disrupting the wider financial services industry and overall economy – in the UK and beyond. We’ve seen the impact of specific banks not being able to adapt in recent history (there have been 562 bank failures since the year 2000), with high profile collapses such as Lehman Brothers around 2008 leading to a period of economic downturn.

 

Traditionally, the financial sector and regulators have been focused on governance when it comes to capital and crime - running detailed KYC checks is one example and risk-weighted assets brought in under Basel III is another. These remain critical to ensuring banks are financially solvent and  protected against crime, such as fraud, corruption, and money laundering.

However, it’s no longer enough to focus just on capital and crime. The acceleration of digitalisation, transformation, and new technologies, supported by collaboration with third parties, is introducing a new, complex threat landscape. These threats include Cyber and IT risks, as well as financial and non-financial risks that may impact the bank’s ability to continue operating. New frameworks such as The Digital Operational Resilience Act (DORA) and Prudential Regulation Authority (PRA) policies extend the onus onto banks to understand who they’re really doing business with and putting governance in place around this.

It starts with a ‘single version of the truth’

While frameworks such as DORA provide clarity and certainty around the bank’s obligations, the practical steps needed to complete more in-depth third-party checks can be challenging.

Operational resilience is everyone across an institution’s job. And when different parts of the bank, and the teams within it, can collaborate it’s easier to meet obligations around understanding and reporting on third parties. Building a consistent foundation with one single version of truth across all business data is one way to reduce the burden and operational resilience easier.     

But achieving this can be challenging, due to the increasing, exponential data volumes that banks must manage. To get a ‘single version of the truth’ when it comes to data, financial institutions must invest in the foundational technology, infrastructure, and data strategy of their business, with an immediate, ongoing focus on data management. Institutions still operating in siloes, with legacy technology, and/or with no ‘single version of the truth’ will fall behind.

By working with a trusted external data provider, such as Dun & Bradstreet, financial services firms can build a dynamic and accurate data foundation, and achieve a ‘single version of the truth’ when it comes to third-parties.
 

The importance of dynamic and accurate data

In an ideal world, issues regarding a specific third party highlighted in one area of the business, can be escalated to others quickly, minimising the scale of disruption. This is especially important in cross-border, global groups where international data is needed.

However, as the global supply chain develops in complexity, and becomes more digital, 

data must be kept up to date on an ongoing basis. To achieve this, there is a need to establish a unified approach that has data at the forefront, bringing together and enabling technology, people, and processes.

 

Knowing the need for accurate third-party data is paramount, solely relying on suppliers to provide updates to the data themselves without verification puts financial institutions’ resilience at risk. By working with a trusted external data provider, such as Dun & Bradstreet, financial services firms can build a dynamic and accurate data foundation. This can be delivered via automated workflows with change notifications. By working with a data partner, banks can fulfil obligations and improve resilience, without needing to put additional pressure on resources, or build new systems.

If the foundations of operational resilience are in place, banks can explore digitisation with confidence to drive efficiencies, maximise growth potential in an ever-changing integrated market, and make a real impact on customers. 

Dun & Bradstreet combines global data and local expertise to help clients make smarter decisions. We help our banking and financial sector clients with:

  • Rethinking operational resilience and third-party risk management.

  • Realising digitisation and improve customer experience.

  • Reaching Net-Zero.

  • Changing the fabric of SME Lending.

To discuss how we can support your organisation, email our expert below.

 

cover image of the report

   Victoria Adams

  Strategic Relationship Director   – Financial Services

Contact Victoria