For Banks and Financial Institutions (FI), health checks should be at the forefront of maintenance planning for internal systems and identification of financial risk. Often organisations neglect to carry out frequent health checks, but what could be the potential implications of failing to health check your systems and to maintain regulation and compliance? This article highlights the importance and necessity of regular health checks for organisations.
Why should organisations consider a health check?
Health checks are a critical process to ensure smooth running of systems and platforms, by evaluating financial risks to minimise their impact. From transaction monitoring and name list screening to KYC processes, conducting a system health check is essential for banks and FI’s. With a key focus on reviewing and assessing infrastructure, workflows, algorithms and rules, many organisations can benefit from an increased confidence in their systems by carrying out a health check.
Across the financial sector, efficiency is crucial. Organisations are constantly scoping out new ways and means to reduce costs and introduce smart ways of operating on a daily basis. This is where a health check can save both time and money. Missed opportunities to optimise and upgrade can hinder projects by failing to identify systematic problems.
Keeping up with technology is increasingly important in this digital era. Systems that have been configured and used for a period of time, may no longer be suitable to keep up with ongoing demands. Outdated software that can’t cope with specific needs is frustrating for end users. A health check can identify if your system is experiencing performance issues, resulting in reduced effectiveness and make suggestions to rectify these issues.
What is the risk?
1. Systems Vulnerability
Operating best practice is essential to ensuring effective and decisive handling of AFC data and decisioning. When working with sensitive data, it is critical to ensure system security so information doesn’t fall into the wrong hands. Vulnerable systems are not only an organisational threat, but are also at risk of outputting incorrect information if they have been compromised.
2. Unknowingly Breaching Regulations
The legislative environment is complex and constantly being updated. It is the responsibility of each organisation to know which legislation relates to their industry, and to conduct business operations compliantly. Poorly maintained and managed solutions could lead to internal and external regulatory breaches.
3. Consumer Knowledge
Being a Subject Matter Expert isn’t enough. Consumers also need thorough knowledge of internal systems and understanding on how to utilise the platforms. Multiple touchpoints may be required meaning an increased risk of systems not functioning as they should. Consumers may not fully appreciate the intricacies and flexibility of their solutions and could miss opportunities or fail to identify pitfalls.
1. Financial Penalties
There have been many news articles covering AML breaches made by Banks and FI’s, and each time they are followed by mounting fees. Failing to observe and comply with regulators will lead to financial penalties. This outcome could result in a large financial burden for the organisation and an unwanted investigation could be conducted by the regulators, leading to the risk of their Banking Licence being revoked.
2. Reputational Risk
The biggest cost of all to Banks and FIs is potentially irreparable damage to their reputation. Loss of confidence between customers can be detrimental and have an impact on future business. Health checks will be able to flag any issues, enabling organisations to proactively reduce risk and put plans in place to rectify problem areas.
3. Regulatory Scrutiny
Organisations that expose themselves to substandard health checks are at risk of scrutiny from regulators and their internal and external auditors. Any system or platform gaps could have a severe impact and lead to unwelcome investigations from assessors and regulators.
At Contineo FRS, we provide robust health checks that give organisations a detailed findings report on compliance and regulation status, along with recommendations on system technology and upgrades. Request a service consultation here to find out how we can help your organisation.