Integrating risk management and agile to drive change - Edward Hida

The need for risk management to adapt to Agile methods represents an important change in thought for organizations. However, this is one fragment of a larger phenomenon — the imperative for risk management to transform itself to meet a more dynamic environment highlighted by an uncertain economic outlook, regulatory change, and new competitive threats. Risk management should increase its focus on non-financial risks such as cybersecurity, data, conduct and culture, fraud, third-party, climate, and model risk, to name a few; switch from a reactive to a proactive approach, and become a full participant in efforts to drive business performance and set overall strategic goals. With this change, organizations can improve risk management’s role in helping drive business performance. Adapting risk management to work efficiently with Agile methods will be a key factor in this transformation.

The increase in the need for flexibility and speed in the financial services sector has made “change” — business as usual. This is generating opportunities for organizations, through digital and mobile channels that provide avenues for reaching clients. On the flip side, the changes are also creating complex, new obstacles.

The most notable of these is growing competition and desire to create new and innovative products. Many of the new players are non-conventional. For example, Fintech companies are bringing new, high-tech products to the market. Even Starbucks has made big changes in payments, whilst the Facebook’s, Google’s, and Amazon’s of the world (FAANG) are building customer expectations for e-commerce companies.

FAANG companies are dissolving the lines which separate technology and finance based companies to create “tech fin”. These are tech companies that are entering the zone of financial products and services. To keep par with competitors, organizations need to adapt and utilize technology, AI, big data, machine learning, and so on. Boiled down, there are is a need for increased speed and flexibility.

In the face of this challenge, organizations are turning more to Agile techniques — which means to move forward more incrementally and iteratively. This Agile method involves completing a smaller project, testing it with customers, and then building on their feedback, over and over.

Agile methodology is connected with software development, where it has been used since the early 2000s. However, many of its ideologies are being applied to other types of change and development projects. Financial organizations are finding that Agile techniques can drive change and innovation. They can also help increase customer satisfaction because of the early incorporation of customers in product development.

Agile is a good fit for today’s dynamic environment. However, it can be tough to integrate Agile with the need for risk management. These represent two very different schools of thought. While Agile focuses on speed and action, traditional risk management focuses on a thorough assessment and then specific risk management actions. Financial institutions that have not applied risk management modernization and innovation may often find that the two approaches clash with one another, which makes it difficult to make use of Agile methods advantageously.

While the traditional development approaches work well for some products, in many cases, Agile can afford financial organizations more agility and speed. It usually involves a series of incremental changes, with constant customer feedback, that together result in a completed project. This approach is especially suitable in a world where organizations are constantly trying to keep up with customer-driven, volatile change.

Edward Hida

A point of view is the angle of considering things. It’s a platform for people with a vision and a story to tell.

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