“I have learnt that success is to be measured not so much by the position that one has reached in life, as by the obstacles one overcomes whilst trying to succeed”.
Dear readers, welcome back to the “Risk Watch” series. For the past couple of weeks, I have been debating on what next is relevant in risk management in the year 2020. Every year, we make new year resolutions, but by January ending of the same year, we revert to our old ways of doing things. Instead of new year resolutions, let us rather remind ourselves on how best to make banking safer, more relevant and also more appealing. Let us make banking GREAT again!
Banks play a significant role as they hold over 85% of the total assets of the financial system in Ghana. It is therefore incumbent on banks and their stakeholders to understand their critical role in the Ghanaian financial system and the economy as a whole.
The Disruptive world of technology is at its peak and here to stay
Digital banking and of late Artificial Intelligence have made banking very easy and yet requires diligence and care. Digital banking disruption is going to impact every bank in 2020. Either an organization is going to be disrupted, or it will be causing disruption. Either way, preparing for this major transformation in banking will require changes in business models and adjustments in people’s roles and in the organization’s culture. The key will be in taking action to ensure financial and business success in the future. Let us accept it fully and take advantage of its benefits before we are overtaken by events. Mobile banking transactions has overtaken cheques as a means of payment. The collaboration is getting more intense and digital banking centers are gradually replacing traditional bank branches. Are you ready for the invasion and preparing yourself through self-upgrades to be relevant? Will you be among the chosen few remaining to continue the new banking model or will you be too archaic to join the new boat?
The banker-customer relationship has not changed, whether its physical virtual.
Intense focus should be on customer care because customers have a wider choice. Digital banking is not the end of the banker-customer relationship. The fact that we don’t see customers physically does not mean the caring aspect of the banker’s duty to them should be reduced. Let us be thankful for calls from customers. It should never be a bother to us otherwise banking will be boring without the human touch.
Corporate Governance Directive (CGD, 2018)
Under the corporate governance directive of bank of Ghana, banks should always adopt sound corporate governance principles and best practices to enable them undertake their licensed business in a sustainable manner. The is a need to promote the interest of depositors and other stakeholders by enhancing corporate performance and accountability.Banks, therefore, have a responsibility to ensure that they manage funds prudently, and engage in practices and behaviours that make them safe and sound, so that they are able to attract and retain the trust and confidence of the public.
Effective Monitoring of Loans
Credit risk management is the key driver for generating returns. Diversion of funds by borrowers and non-repayment of loans granted can be avoided if the closeness with the customers before the facilities can still be maintained after disbursement. Check their inflows and bank deposits, as well as withdrawals and beneficiaries of their payments, to ensure they are on track. Some customers play hard to get after receipt of the loans.
Be mindful of the power of social media …Quote by Jeff Bezos.
“If you make customers unhappy in the physical world, they might each tell SIX friends. If you make customers unhappy on the Internet, they can each tell SIX THOUSAND friends.” Jeff Bezos
Do not under-rate the new payment systems
Patronage of cheques has reduced. The value of cheques cleared at various banks dropped from the GHC99.3 billion to GCH84.5 billion recorded the same period last year. This means cheques cleared reduced by about 15%. A report by the Bank of Ghana has indicated that the total value of mobile money transactions for the first six months of 2019 reached GHC140.2 billion. This is an increase from the GHC104.6 billion recorded in the same period in 2018. This represents a 34% rise in the value of transactions recorded for the period under review. This research, therefore, shows that financial transactions in Ghana are gradually shifting from traditional banks to the platforms offered by telcos.
Identify your Typical Customer Complaints and work to reduce them.
Complaints should not be a Bother to us. A complaint is a failure to deliver an expected level of service, or behaviour which is inconsistent with good customer service, and which results in customer dissatisfaction. Typical customer complaints are: Wrongful dishonour of cheques, Payment of stopped cheques, Wrongful debits on accounts, Customers not informed of return of cheques deposited, SMS not effected to reflect transactions, Rude and unprofessional staff, Unknowledgeable/Ignorant front liners, Unprofessional telephone etiquette, Lack of education on product features, Delays in loan processing, and the almighty System failures. Put steps in place to intercept and manage customer problems before they blossom into public complaints, or worse – lawsuits. At every level of enquiries, complaints should be acknowledged before it is escalated by the customer. Prevention is better than cure.
Protect your Bank’s Revenue and Fee Income.
Be mindful of the effect of loss of revenue due to breach of customer data and confidentiality, breach of the regulatory requirements in account opening leading to money laundering and regulatory fines. Every bank transaction is covered by regulations from Bank of Ghana and reputational damage can affect your bank’s public image and loss of business. Transparency in sales acquisition also reduce regulatory, compliance and ethical risks.
Dealing with Cyber security risks
Most banks have already made protection against cyberattacks a top strategic priority, but cybersecurity will only increase in importance and require ever greater resources. As banks store an increasing amount of data about their customers, the exposure to cyberattacks is likely to further grow. Cyber risk that affects technical failure of the IT infrastructure of a bank leads to possible financial losses and damaged brand value. Data theft and damages affects the bank’s revenue and slows down operations, leading to business losses from court actions and legal claims as a result of a cyberattack. Investment in good cyber risk management schemes are a must have.
Risk Managers should have a Middle Ground
Risk, Audit, Governance and Compliance Managers should often be in favor of risk reduction, but not forget that risk management is about optimizing risk rather than removing it entirely. According to the State of Enterprises Risk Management Report 2020, “..They may focus on unexpected or unplanned events that may impact profitability, competitiveness or reputation but ignore the fact that failure to incur the right risk can likewise be potentially problematic, by causing enterprises to stagnate, lose competitiveness/market share or otherwise underperform their competition. On the other hand, the importance of assessing, mitigating, managing, measuring and tracking risk is well known; enterprises should assume only appropriate risk and avoid or mitigate excess risk–or potentially incur dire consequences. Finding the right middle ground is as important as it is challenging.”
There is a no one-size fits all in a bank’s approach to fraud prevention. Basic reminders include a multi-faceted approach: technological plus human interface, phone calls for authentication of some transactions, dual control and segregation of functions, regular reconciliation, monitoring transactions, etc.
Keeping Staff Happy
Happy Staff=Happy Customers. Its been a well-known fact that employees are a key asset in an organization. All supervisors are the Human Resource representatives from Head office. Management of staff, welfare and personalities should be a top priority for every senior management. If staff are not treated well, it shows in the way they handle customers. There need to be mutual respect among all levels of staff and regular clear-cut communication, which becomes a big risk mitigating factor.
To sum it all up, let us take an extract from the PWC Banking Survey report published in August 2019, “Going forward, banks will have to properly streamline the various aspects of their businesses, if they are to effectively manage the potentially complex web of operational efficiency, liquidity and risk management issues, whilst maintaining a desired level of profitability. Market research and strategy formulation, restructuring, digitization, systems and process improvement, data and analytics and risk management represent some of the key activities banks may undertake to help achieve targets around profitability, liquidity, risk management, asset growth, capital adequacy, etc”
On this note, I wish you a happy new year as we take customers to a new level by making banking great again.
ABOUT THE AUTHOR
Alberta Quarcoopome is a Fellow of the Institute of Bankers, and CEO of ALKAN Business Consult Ltd. She is the Author of two books: “The 21st Century Bank Teller: A Strategic Partner” and “My Front Desk Experience: A Young Banker’s Story”. She uses her experience and practical case studies, training young bankers in operational risk management, sales, customer service, banking operations and fraud.