Banking Risk Management Trends in the Digital Transformation Era
Over the past few years, risk management and compliance activities worldwide and in Vietnam have undergone many changes. In this article, 1Office wants to provide an overview of the current trends in risk and compliance management for banks. We will also point out the challenges and difficulties of applying technology to manage existing banking systems in Vietnam.
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Trends in Banking Risk Management in Vietnam in the 4.0 Era
The 4.0 revolution has spurred socio-economic development, leading to rapid changes across all industries worldwide. Some of the developments driving this accelerated growth include:
- Robotic processing systems;
- Natural language processing;
- Artificial intelligence and machine learning models;
- Augmented virtual reality;
- Voice and facial recognition technology;
- Big data and machine learning…
These inventions have significantly improved the quality of human life, and the banking industry is no exception. The 4.0 revolution has helped the banking sector make positive changes in its operational methods and risk management. This is also the current trend adopted by most banks around the world.
See more: The Importance of CRM in Banking Management
How Has Applying 4.0 Technology to Banking Risk Management Changed the Industry?
New technologies have facilitated the monitoring and risk management processes in the finance and banking sector. The impact of technology on the banking industry is evident in the following aspects:
- The horizontal connection of intelligent systems;
- The vertical integration of value chain networks;
- The use of engineering throughout the entire value chain;
- Acceleration through disruptive technologies.
Those are the four aspects of the banking industry that have changed with the application of 4.0 technology. Let’s explore each aspect in detail with 1Office!
Changes in Customer Expectations
This is one of the user-driven factors that will create major changes in the business models and structure of the banking industry. Generation Z will be the primary target audience for commercial banks in the future. This demographic is characterized by its extremely keen ability to access and adopt technology. Additionally, these customers are very price-sensitive and spend a lot of time on the internet. Therefore, the trend for commercial banks is to transform their operating models in the following directions:
- Developing automated services to reduce time and costs, and enhance the customer’s digital experience;
- Developing personalized product advisory and pricing systems to optimize the sales process and maximize profits
Both directions require the banking risk management system to be automated. Additionally, more customer data is needed.
Application of Technology in Risk Measurement and Analysis Techniques
Banking risk management is not as simple as we often think. It is an extremely challenging problem that consumes significant resources. The emergence of new technology is a saving grace for the banking industry. This software enables faster data calculation and processing at a lower cost, which helps banks make more effective decisions.
The Emergence of Non-Financial Risks
In addition to the benefits that new technology brings, it also leads to the formation of non-financial risks. This forces regulatory and supervisory bodies to tighten regulations and increase risk management. Some risks that Vietnamese commercial banks need to pay special attention to today include: Systemic risk, model risk, cybersecurity risk…
The Current State of Technology Application in Management by Banks in Vietnam
Following these trends, not only commercial banks but also the State Bank have researched and implemented technologies. The goal is to increase operational efficiency, enhance customer experience, and reduce costs.
Some typical applications by banks in the digital technology era include:
- Applying AI for customer personal data recognition and management
- Using AI in customer care. A specific example is TP Bank’s automated chatbot…
- Regarding electronic authentication, the service was widely deployed at many banks in 2020.
- ….
The applications of Industry 4.0 mentioned above have almost completely changed the management and working methods of the banking system. We hope this information is helpful to you.
