DIGITAL transformation is creating new risks within the financial services industry, new research claims.
Adopting new technologies, including artificial intelligence (AI) and machine learning, cloud computing and distributed ledger technology (DLT), will enable the financial services sector to significantly reduce operational costs, said a joint report from trade body UK Finance and consultancy firm Parker Fitzgerald.
However, the report warned that the speed and scale of this digital transformation is contributing to the emergence of new risks.
For example, the growth of digital outsourcing via the cloud will allow companies to become more efficient, but could also create cyber vulnerabilities and emerging risks further ingrained within the business supply chain.
The safeguarding of data will be core to sustainable digital financial services, the report added.
“Given today’s ever-increasing threat of cyber-attacks and data protection violations, it’s vital that the financial services sector prioritises operational resilience – just having a firewall simply doesn’t cut it,” said Dan Crisp, director of technology and digital at UK Finance.
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“The speed and scale of digital transformation makes it essential for new technologies to be integrated safely within existing operating models while minimising risk.”
Matthew Hayday, leading partner of global technology services at Parker Fitzgerald, added that digital transformation “is both inevitable and necessary for the financial industry”.
“To safeguard their organisations through the digital transformation journey, financial firms need to close the gap between their digital aspirations and the reality of their legacy IT estates,” he added. “Key activities include reducing reliance on legacy systems, de-cluttering redundant systems, and using analytics to predict and quantify the impact of non-financial risks.”