“As the world moves towards thinking about data as a product, we need to start building our services with the data they serve in mind. Making our data products more interoperable, secure, and governable will be crucial to the success of future initiatives in this field.”

 — Nick Broughton, CIO at Novuna 

Data is now a key driver of business outcomes across various industries — including financial services. In fact, 83 percent of leading financial services firms say that data is their most valuable asset. 

However, expanding the amount of data your organization stores and processes poses risks as well as opportunities. Without appropriate procedures, you can find yourself falling foul of evolving regulations or suffering from brand-damaging cybersecurity incidents. 

In this post, we’ll explore how you can prioritize data protection by implementing a regulatory framework. 

Data risks in your digital banking ecosystem 

In many respects, the risks of poor data governance are no mystery. Headlines highlighting the potential impact aren’t hard to come by. The $1.5 million fine levied against Denmark’s Danske Bank earlier this year is a case in point. 

But understanding the potential cost doesn’t make it easier to map out the risks — especially because these risks are evolving. As your digital services change, so will the threats to your data security. 

Emerging risks you need to consider include: 

Growing use of customer data

‍Your customers want personalized services — and they’re willing to share their data to get them. However, meeting these expectations means storing and sharing greater quantities of customer data across your organization. To stay compliant, you’ll need to protect this data against threats from third parties or unintended breaches. At the same time, you’ll need to ensure you have the necessary approval from your customers to use their data. ‍

An expanding risk surface

‍As your organization extends its digital capabilities, it also makes itself more vulnerable to cyberattacks. Adopting new applications increases the possible points of entry into your systems. As a result, 82 percent of organizations believe their digital transformation has caused at least one data breach. The more systems you have, and the more different points of connection between them, the greater your exposure — and the more you’ll have to prioritize data governance. 

Data literacy challenges

‍The security of your data — as well as its overall quality — depends on your employees. If they aren’t comfortable with data best practices, they can easily compromise the security or consistency of your data. As the use of data extends beyond your IT and data teams, you’ll need to ensure that the skills to work safely with data are extended, too. With 85 percent of data breaches caused by human error, the risks of poor data literacy can’t be overstated. 

Regulatory changes

‍Over the past five years, far-reaching data regulations have been introduced across many jurisdictions. From the EU’s GDPR to the US’s CCPA and Canada’s CPPA, these expansive legal frameworks require significant attention if you want to stay compliant. But these regulations are themselves being outpaced by the emergence of new tech. As FSIs look to incorporate AI and machine learning, regulators are racing to keep up — and that makes staying compliant an ongoing challenge. 

With such a broad range of risk factors to contend with, FSIs need to adopt a clear, coordinated approach to data governance in the form of a regulatory framework. And with 22.4 percent of all cyberattacks in 2022 targeting financial services firms, complacency isn’t an option. 

Managing data risks with a regulatory framework 

A regulatory framework sets out the systems, processes and guidelines that keep your organization compliant with data regulations. It is a structured, top-down approach, and to implement it effectively, you should: 

1. Establish a regulatory compliance team

‍A dedicated team clearly defines responsibility. Ideally, the team should include risk managers, legal experts, compliance officers, and representatives from key departments. 

2. Conduct a risk assessment

‍Where are the gaps in your current data practices? How stringent are your access controls, and who has oversight? What key threats does your organization face, based on its current services and tech estate? Answering these questions will guide the development of your data processes and highlight key areas for improvement. 

3. Develop appropriate policies and procedures

‍These policies should be clear, comprehensive and well-documented. They should cover all aspects of your organization, from customer onboarding and transaction processing to data security and reporting. The aim is to ensure that employees across your organization never have to rely on their own judgment about how to handle data. 

4. Provide necessary training

‍As you roll out your new processes, you need to ensure everyone has the knowledge to follow them with confidence. The most effective way is to deliver regular data-focused training sessions for staff. A one and done approach only leads to best practices gradually falling by the wayside. 

5. Monitor and report

‍Are your procedures having the desired effect? You need to ensure your efforts are leading to improved data literacy among your staff and a higher overall standard of data protection. This means you need to continually audit your performance. This can include automated data quality checks and manual reviews. You should also ensure there is a clear process for reporting noncompliance. 

6. Focus on continuous improvement

‍To keep pace with evolving regulatory requirements and emerging threats, your regulatory framework needs to be agile and adaptive. Otherwise, it risks becoming obsolete. Establish a regular review process to revise and update your framework to meet the changing landscape. 

Tackle your data risks with Modes 

From hyper-personalized services to predictive analytics, the most significant trends in digital banking demand a sophisticated, fully integrated approach to data. However, the compliance risks that accompany these opportunities don’t just threaten your brand safety and customer loyalty — they can come with major financial costs, too. 

We understand that implementing a regulatory framework for your data isn’t easy. Modes is here to help. We offer tailored, collaborative partnerships that can guide you through each stage of your data transformation. 

So, if you’d like to work with an organization that is committed to co-creating your digital future, connect with us today.