Pub. 1 2021 Issue 1

February 2021 | 21 The most pressing digital banking risk management issues break down into two categories and should be addressed so that your insti - tution can move forward. more forward-thinking culturemust be a top-down change. • Unwillingness to change: KPMG notes that “Current executives and profes- sionals will either become fast believ- ers or they will hold back your prog- ress.”The imperative is to identify the former category and empower them to lead your digital transformation. • Lack of innovative thought leader- ship: 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 amobile banking app is the only component of a digital strategy, or that digital-first means that personalization is no longer needed. Back-end opera- tions and internal processes must fully support a digital environment that effectively identifies and fulfills indi- vidual customer needs based on their actions and behaviors. Regulatory Risks: • Digital compliance and cyberse- curity: Banks operating in a digital environment must still comply with all applicable laws and regulations. This includes paying particular attention to uniquely digital processes that are covered 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 third-party vendors. Since institutions are still ultimately responsible for all functions, a robust vendor manage- ment program is key to ensuring that no unqualified third-party provider is hired. A provider must understand the applicable regulatory requirements, be able to adhere to them and guaran- tee compliance. • Fraud and identity theft: Community banks canmeet the challenges of fraud and identify theft by reviewing and strengthening their Bank Secrecy Act/ anti-money laundering (BSA/AML), Know Your Customer (KYC), customer due diligence and other relevant com- pliance programs. Fortunately, digitiz- ing internal processes yields more data and the ability to use AI to helpmonitor customer behaviors andmore quickly flag potential fraud. There is no doubt that digitization can increase certain risks for the community banks that do transform, and the answer to this dilemma is enhanced digital banking risk management. ■ Steve Kent is senior director, Digital Strategy, at CSI.