As financial technology (fintech) continue to transform financial services globally, the Central Bank of Nigeria (CBN) and the Chartered Institute of Bankers of Nigeria (CIBN) have urged risk managers to enhance their techniques to avert risks that may arise from the activities of fintech.
This call was made at the Risk Management Association of Nigeria (RIMAN) mandatory seminar for certified risk managers, over the weekend in Lagos.
Delivering her paper titled” ‘Regulatory perspective on the future of risk management in Nigeria’, the Deputy Governor, CBN, Mrs. Aishah Ahmad noted that risk functions of banks would have to be up to date to cater to new and arising risks from technology.
Ahmad, who was represented by the Director, Banking Supervision, CBN, Mr. Christian Okoye said: “The outlook of risk functions in banks and financial services firms would be fundamentally different from where they are today and as such, calls for timely action to guide against banks being overwhelmed by the new requirements. This is consequent upon the new technology that ushered in complex security challenges, cybercrime and various other forms of risks.”
“For instance, the emergence of new competitors, there would be increased customer expectations which would cause massive alteration in banking as the future of banking is entirely encapsulated in technology mostly offered by Fintechs.”
She added: “While a variety of organisations are exposed to cybercrimes, the financial sector is particularly vulnerable given its crucial role of financial intermediation. With the presence of Nigerian banks in Africa and other parts of the world, there is an increasing demand for compliance with our domestic regulations such as the Nigerian cybercrime act, anti-money laundering regulation, foreign regulations such as the European union central data protection regulation and the framework on cyber security that was released yesterday.”
She further added: “The future risks functions in Nigeria would entail that risk function would likely be integrated in every bank process irrespective of their contribution to business.”
Speaking on the on regulatory measures taken by CBN, she said: “It is evident that fintech firms are profoundly revolutionising the way financial services are provided. It important areas such as asset management through robot advisors, capital raising through crowd funding platforms and payment systems through virtual currencies. These changes are irreversible and in some cases desirable as fintech firms have the potential to provide great benefits to customers in terms of lower cost and financial inclusion. However, fintech firms also present new and arguably more severe concerns presented by conventional financial institutions given their small size and business model and the absence of reliable information about their structure and operations thus making them difficult to monitor and vulnerable to economic shocks.”
“There is therefore compelling need to redesign regulations that would specifically address risks that may emanate from this new emerging and increasingly important class of financial firms.”
“The CBN on its part is committed to strengthening the regulatory and supervisory framework for fintech activities and cyber risks and encouraging realistic and vulnerability testing and contingency planning for regulated intuitions in partnership with stakeholders in the financial industry. The bank is developing cyber-security framework to be realised soon.”
On his part, The President/Chairman of Council, CIBN, Mr. Uche Olowo said: “The trend in today’s digital world has a potential to significantly alter the risks landscape of companies around world and Nigeria included. And how will respond and manage risks, would count for us. Risks are no longer things to be feared but it should be taken advantage in improving the value they offer. In Nigeria, risk function would have to cope with evolution and there should be newer response of risks strategy.”