Pub. 10 2020-2021 Issue 5

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S — H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S January • February 2021 11 imperative is to identify the former category and em- power them to lead your digital transformation. • Lack of innovative thought leadership: It will take real out-of-the-box thinking to digitally compete with the big banks. If that kind of modern thinking doesn’t already exist within your institution, invite it in. • Misguided beliefs: Squash any notions that a mobile banking app is the only component of a digital strategy or that digital-first means that personalization is no longer needed. Back-end operations and internal pro- cesses must fully support a digital environment that effectively identifies and fulfills individual customer needs based on their actions and behaviors. Regulatory Risks: • Digital compliance and cybersecurity: Banks operat- ing in a digital environment must still comply with all applicable laws and regulations. This includes paying particular attention to uniquely digital processes cov- ered under specific rules, such as electronically signing documents per the E-Sign Act. However, institutions can mitigate overall risk by investing in technology designed to help banks comply with the regulatory framework and strengthen cybersecurity. • Third-party risk management: Out of necessity, many banks outsource all or part of their digital strategy to The Lyric Theatre, CCS CHFA business finance customer, Fort Collins third-party vendors. Since institutions are still ulti- mately responsible for all functions, a robust vendor management program is key to ensuring that no un- qualified third-party provider is hired. A provider must understand the applicable regulatory requirements, be able to adhere to them and guarantee compliance. • Fraud and identity theft: Community banks can meet the challenges of fraud and identity theft by reviewing and strengthening their Bank Secrecy Act/anti-money laundering (BSA/AML), Know Your Customer (KYC), customer due diligence and other relevant compliance programs. Fortunately, digitizing internal process- es yields more data and the ability to use AI to help monitor customer behaviors and more quickly flag potential fraud. There is no doubt that digitization can increase certain risks for the community banks that transform, and the answer to this dilemma is enhanced digital banking risk management. n Steve Kent is Senior Director, Digital Strategy, at CSI.