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Home ABA Banking Journal

Navigating risk while staying nimble

January 2, 2024
Reading Time: 3 mins read
Navigating risk while staying nimble

As we look to the future, in all of its complexity and uncertainty, we need to strike the right balance between managing risks, pushing back on unfair rules and leaders and keeping ourselves moving forward with innovation.

By Julieann Thurlow
ABA Viewpoint

As someone who has worked in the banking industry for over three decades — as both a banker and a bank regulator — one of the things I know is that the only constant in our industry is change. And wow, are things ever changing quickly!

In just the last few months, we have seen new regulatory actions that will have a significant impact on our business operations. Customer preferences are changing, too: people now conduct most bank transactions at home on their phones. Our bank’s daily mobile banking transactions are more than double the number of in-branch transactions, even on Fridays. Meanwhile, technology is evolving at breakneck speed, with breakthroughs happening in artificial intelligence, machine learning and quantum computing.

At the same time, we are dealing with unprecedented external challenges that will also have a profound effect on our future: an interest rate environment unlike anything we’ve seen in recent history, major environmental shifts, a tense geopolitical outlook and cybersecurity threats to our critical infrastructure.

This trifecta of challenges has the potential to reshape the world of banking as we know it—and it presents us with many novel risks.

Consider the direction in which technology is driving innovation and competition. Jack Dorsey and Elon Musk — two of the most imaginative innovators of my time — have both turned their attention to the transactional side of the banking business. Neither of them have ever run a business that is regulated to the degree that the banking industry is regulated, but you can bet they will push the envelope on what can be done. And we should, too. I encourage every banker to re-engage with their younger customers around what they are doing with their bank, what financial services they are doing elsewhere and why. You will be enlightened, particularly around the “why.”

On the regulatory front, the environment has become more adversarial. Washington is rapidly rewriting the rules under which our banks have operated for not just years, but decades. This regulatory upheaval will require banks to rethink their product set, and possibly their business model, to ensure their future viability. This could be an opportunity to redesign with today’s consumer in mind, the consumer that banks primarily via mobile, not the one that come into the bank to sit and chat.

The operational, business and compliance risks facing our institutions are numerous. But there’s a bright side: bankers are, by nature, expert risk managers. None of our banks would be successful if we didn’t know how to properly assess, measure and manage risk. We have ridden out difficult times before and made the changes necessary to continue to fulfill our mission and obligations to our customers and our communities.

As we look to the future, in all of its complexity and uncertainty, we need to strike the right balance between managing risks, pushing back on unfair rules and leaders and keeping ourselves moving forward with innovation.

Now, understandably, our natural inclination is to eradicate risk and comply. But to succeed and thrive into the future, we must get comfortable flexing those muscles that enable innovation. And in light of the regulatory challenges we face, we may need to rethink our bank strategy, spend smartly and pick our niche where we can succeed.

I guarantee you that 2024 is going to challenge us in ways that we can’t even begin to expect sitting here today. We will need curiosity, creativity and innovation to navigate the challenges we face, now and into the future. Are you ready?

ABA Chair Julieann Thurlow is president and CEO of Reading Cooperative Bank in Reading, Massachusetts.

ABA Viewpoint is the source for analysis, commentary and perspective from the American Bankers Association on the policy issues shaping banking today and into the future. Click here to view all posts in this series.

Tags: ABA ViewpointInnovationRegulationTechnology
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