Cloud migration in banks pose multiple challenges in risk management. CROs should plan in terms of resource investments and satisfying future requirements.
Risk management systems, core banking application and processes are all inter-connected. Thus, moving the risk systems to the cloud has its own effects on other banking systems. Consequently, the other applications may need reconfigurations. So, the migration should be designed carefully considering the broader enterprise-level aspects and other applications involved.
Legacy banking systems often incur maintenance costs, while the depreciations costs are minimal. On the other hand, most cloud platforms offer contract incentives to compensate near-term migration costs. Yet, large expenses may impact the P&L. Therefore, the migration costs and subsequent operating costs should be planned well to manage the financial impact.
Cloud migration and operation experts are difficult to recruit. Moreover, they are harder to retain, considering the high attrition rates due to COVID-19 pandemic. The cloud team culture is fast moving, evolving, agile, and focused on quick delivery. Risk management executives need to adjust their operations to facilitate this new culture, while preserving control and governance.
What CROs and risk management leaders can do
Cloud migration is not a point-to-point journey, it is a multi-step journey. The migration requires careful planning with respect to the wider organizational cloud strategy. CROs and risk leaders can help to formulate the overall strategy and the necessary foundational capabilities. Below are the three step to set a smooth cloud migration in terms of risk management in banks.
1) Set a unified cloud adoption approach
The number of risk management apps in banks are quite high and moving them to the cloud can be tedious. However, a unified cloud strategy aligned to the institution’s risk management strategy is necessary. Envisioning the migrating datasets and how the data will be useful is important.
2) Develop a use case document focusing on the cloud migration
Risk leaders should prioritize the models and functions that need to be moved to the cloud first. They should come up with the right use cases amidst the numerous possibilities. Furthermore, CROs should perform cost-benefit analysis and provide the use case document. The priority use cases should include tasks that need speed, external data integration, and heavy computations.
3) Design the operating model focusing on effective cloud risk management
Risk teams require analytical skills to construct, test, and enhance the cloud-based risk models. CROs should regularly check the impact of better skills on risk functions and risk operations.
Cloud-based risk management in banking is a great option with multiple benefits. Most of the banks have already moved to the cloud and it is already becoming a necessity. Banks that don’t move their systems and functions to the cloud could not compete effectively and ultimately lose to competitors. A well-planned cloud implementation approach would help banking risk managers to think proactively and guide the organization throughout the journey.