Fintech Risk Assessment

The complexity of the financial industry has increased exponentially with the rise of fintech, as new technologies such as machine learning, artificial intelligence and distributed ledgers are integrated into industry workflows. Market and operational risks are far from new, but fintech represents a new ballgame.

Financial technology is exploding and it needs attention, require significant risk management and prepare for regulations. This requires more security innovation to protect company ecosystems. The subsequent cost to our organizations and economies is substantial and growing. There are several drivers behind the evolving global cybersecurity threat for all sectors. Evolving targets- data is no longer the only target according to Accenture. Rather, companies worldwide are seeing their core systems, controls systems and infrastructure being hacked, which can lead to greater disruption. Evolving impact- it’s no longer just about theft. For example, cyberattacks are changing approach from simply stealing data to destroying or altering it to create distrust. Today, data integrity itself is vulnerable. Evolving techniques attack methods are adapting quickly. Accenture found a focus on “the human layer that targets the weakest link people through phishing and malicious insiders.

A new fintech technologies are developing such as distributed ledgers and robotics, as well as more mature offerings like cloud there must be a focus on creating frameworks to enhance how risk is monitored, leveraging a set of principles for calculating the systemic implications of new technologies and entrants. For example, the underlying assumptions of existing models may need to be revisited, risk tolerance levels and acceptable risks may need to be revised, stress testing and simulations may need to increase in both frequency and sophistication, and the list goes on.

To be prepared, risk concerns that arise with the development of the most important financial technologies, and has suggested research directions in risk measurement models, appropriate to manage and mitigate the involved risks. A strict collaboration and open discussion between academics, fintech experts, and regulators can help move us ahead in this direction, developing fintech risk management models that, while limiting the negative impact of disrupting technologies, encourage their development.