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THE CRO’S NEW BALANCING ACT: GROWTH AND STABILITY

Gaurav Kapoor, COO at MetricStream

 

Around the world, consumers and investors are demanding better standards of corporate governance and integrity, thereby shifting the emphasis of risk management beyond traditional risk areas such as financial risk, to non-traditional risk areas such as conduct risk, reputational risk, and ethical risks. Meanwhile, emerging digital technologies such as artificial intelligence and machine learning have introduced new concerns around data security and privacy. Added to that, product lifecycles have shortened, and innovation has accelerated, calling for a greater awareness of the associated risks.

 

Gaurav Kapoor

In this dynamic environment, chief risk officers (CROs) have a dual role – to help the enterprise protect its integrity and reputation, while also catalysing business performance. It’s a tricky balancing act – one that requires CROs to not only provide credible challenge to the business, but also be supportive of profit and growth. With that in mind, here are three key priorities that are becoming increasingly important to CRO success:

 

  • Strengthening cyber resilience

The CRO seems to have emerged as a guardian of the digital universe where digital data volumes have continued to grow, and with them, the scope of cyberattacks has increased. Today, a single data breach can strike at the very heart of the business, impacting financial gains, investor confidence, regulatory credibility, and legal liability. Therefore, it’s no surprise that cyber risks are the number one business risk for many organisations. A 2017 EY and IIF survey of financial institutions found that 77% of CROs globally ranked cybersecurity as the highest risk.

 

While chief information officers (CIOs) and chief information security officers (CISOs) may be in charge of mitigating cyber risks, it is the CRO who is ultimately responsible for the overall risk management programme. By virtue of his or her role, the CRO has a broad view of risks across the organisation and can effectively understand how a data security risk can amplify or influence the impact of other enterprise risks, be it reputational risks, compliance risks, or financial risks. The CRO also has the ability to bring together stakeholders and provide the executive team and board with a big picture view of how cybersecurity risks impact the enterprise at multiple levels.

 

  • Safeguarding the customer experience

Social media has amplified the voice of the customers, enabling them to speak up and be heard over issues such as poor-quality service, unfair treatment, and mis-selling. Today, a consumer complaint – whether it’s a video of an airline’s passenger being mistreated, or a tweet about a company’s unethical business practices – can go viral in a matter of minutes, impacting the company’s brand value, reputation, and customer loyalty.

 

CROs play a key part in mitigating these conduct related risks by driving a corporate culture based on integrity and trust – one that puts customers at the centre of the business and holds stakeholders accountable for their behaviour and actions. CROs are responsible for ensuring that there are sufficient policies, controls, training processes, and reporting mechanisms to keep conduct risks in check. They also need to have monitoring mechanisms in place to flag questionable transactions and employee behaviours.

 

These requirements aren’t just about checking a compliance box, but about doing the right thing, and treating customers fairly, which in today’s competitive world, can have a major impact on business success and performance.

 

  • Being an enabler of innovation

Rapidly changing consumer demands and fierce competition are upping the pressure on organisations to increase the speed of innovation. There are no margins for error, which means that organisations have to make decisions quickly and get them right. To do that, they need to understand the risks and uncertainties involved and take sufficient precautions to avoid untoward outcomes. This is where the CRO has a pivotal responsibility, enabling organisations to make better, faster choices – for instance, avoiding launching a new product in a market that isn’t ready. By helping stakeholders understand such risks and capitalise on the right opportunities at the right time, CROs can be strong enablers of innovation.

 

PwC’s 2018 Risk in Review study found that “adapters” – organisations with risk management programmes that effectively manage innovation related risk – were nearly twice as likely as their peers to say that their risk management function helps boost the odds of success or reduce the odds of failure across the business. In fact, adapters that also consider their organisations to be more innovative than those of their peers, are three times more likely to anticipate revenue growth.

 

Turning to technology

Most of the above priorities of the CRO come down to one core objective – ensuring that stakeholders, particularly the executive management and board, have the risk intelligence they need, when they need it, to make informed business decisions.

For years, that intelligence was buried within mountains of big data. However, today, tools are being developed to sift through this data in near real time. Artificial intelligence and natural language processing are beginning to open up new ways of analysing information to predict risks like potential fraud, or to detect cybersecurity incidents before they occur.

 

CROs also have access to risk management systems and tools that that can help them automate multiple risk management processes and collaborate with stakeholders in other GRC functions to share and reuse risk information. With the few clicks of a button, they can understand how risks interact with and influence each other, the controls that are in place to mitigate those risks, as well as the associated policies, procedures, control tests, issues, and business units. With this 360-degree, contextual risk visibility, CROs can effectively identify where they should be focusing their time and resources.

 

As enterprise risks grow more complex and interconnected, CROs play a crucial role. They act as the guardrails of the organisation, enabling the business to go faster, without losing its balance or swerving off the track. Fulfilling this responsibility may be challenging, but it can be achieved with streamlined processes, clearly defined three lines of defence, and robust risk management technology and analytics.

 

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Business

HOW TO FIX A PROBLEM LIKE WIRECARD IN 60 HOURS

By Shachar Bialick, Founder and CEO Curve

 

On Friday 26 June, the Financial Conduct Authority suspended its permission for Wirecard Card Solutions Limited (the company which issued the Curve Cards and processed transactions for us) to operate, without prior notice or warning. Unfortunately, as I’m sure you’ve now seen, this didn’t just affect Curve, but many other companies relying on Wirecard in the financial sector.

So, that Friday, with just two hours notice, we were forced to temporarily suspend all Curve transactions and money transfer services, which meant that no one was able to use their Curve card from Friday at 12:30pm GMT

Thankfully, as part of our planned growth strategy, we had already started our transition away from Wirecard a few months back by becoming a principal member of Mastercard. This means that we were able to bring more of our core processes in house, as we continue our mission to simplify and unify the world of money for people across the globe.

Over that weekend, and thanks to a herculean effort from the entire team at Curve, along with our partners at Mastercard, and we’ve successfully completed our migration away from Wirecard, bringing our Card and E-money issuing in-house. This process was brought forward to minimise disruption and restore the service for our customers at the earliest possible opportunity and is a truly remarkable feat, completing a process that would ordinarily take months in just a few hours.

 

But that’s only one half of the story.

In addition to issuing, Wirecard were also our acquiring partner, responsible for processing Curve card payments. And so, whilst plans for finding a new global acquiring partner were already well underway as part of our U.S expansion, no partner had been picked and no deal had been signed.

 

So how to solve a problem like acquiring at a moment’s notice?

Enter: Checkout.com – one of Europe’s finest fintechs and, as luck would have it, the agile, flexible, hard-working heroes we needed to get us back up and running at the earliest possible opportunity.

And so, by 9:30pm on Sunday, fewer than 60 hours after we were first told Curve Cards would be suspended, we had:

  • Brought our card issuing in-house (Thanks Mastercard and GPS)
  • Sourced, signed, and integrated a brand new acquiring partner (Cheers Checkout.com)
  • Onboarded and set up Settlement and Safeguarding accounts (Merci Investec)
  • Tokenised and started testing cards (Thank you engineers)
  • Got Curve back up and running with better partners, better technology, and better unit-economics (awesome work everyone)

 

When the going gets tough….

We are so proud of our team here at Curve, and our customers should be too. This weekend shows us that we are a very unique and resilient company. Our team has achieved what many have believed would be impossible in the last two days. We are strong, we are united, we are agile, and we are… exhausted, but forward we go. We hope that we’ve proven to all, including our beloved customers the true value of being an Over-The-Top Banking Platform.

And whilst we are on the subject of our customers… Wow. The support from them has been truly overwhelming. We’ve had messages, tweets, DMs and a wave of public support like no other in our history – fuelling the team and keeping us going as we continued furiously down the path to get Curve back online.

The best companies often grow out of the toughest situations and although this has been one of the most testing times in our history, we have grown a hell of a lot in just a few days. Curve is stronger, confident, more cost-efficient and in a better position to build, innovate and scale for the future.

To paraphrase a famous bank, we are not just a fintech, we are part of something much, much bigger.

 

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Top 10

WHY INDONESIA IS THE WORLD’S NEXT DIGITAL PAYMENTS BATTLEGROUND

Kelvin Phua, Global Head of Payment Networks at PPRO

 

The COVID-19 outbreak has seen the e-commerce sector surge. Despite economic uncertainty, consumers around the world are turning to the internet for the goods and services that they previously would have looked for in-store. In APAC, this has meant that some emerging markets have accelerated their adoption of digital services; the growth that was projected to take years has only taken months.

One notable example of this is Indonesia. According to a recent survey, Indonesia’s e-commerce sector is expecting 50% year-on-year growth with its value set to reach US$35 billion in 2020, up from $23 billion in 2019. What’s more, 30% of the country’s growing e-commerce market is new to online marketplaces and 40% intend to keep using e-commerce after the effects of the pandemic lessen.

With this upward trend has come a reliance on digital payments, and both public and private sectors have responded accordingly. Recently, the Indonesian central bank announced that all mobile payment providers were to replace QR codes with the standardised QRIS (Indonesian Standard QR code), providing a single integrated platform for all transactions made using QR codes across multiple e-wallet providers. On the private sector front, LinkAja has launched an online shopping solution to overhaul traditional marketplaces throughout Jakarta by enabling users to pay for goods using an app with the products delivered straight to their door.

For e-commerce and digital payment providers, these examples are good indicators that the time is right to go after a share of this market.

 

Understanding the playing field

Indonesia possesses many of the key characteristics that are critical to a market’s adoption of digital payments. With a smartphone penetration rate of 60%, well above the region’s average of 51%[1], and having witnessed its middle class grow from 7% to 20% of the population over the last 15 years, it comes as no surprise that Indonesia’s internet economy has more than quadrupled in size since 2015.

Currently, there are 37 local payment methods (LPMs)[2] in Indonesia, with GoPay, Doku, OVO, Dana, and LinkAja some of the frontrunners in the battle to claim a slice of the payments pie. This number is expected to grow as Alipay formalises its entry into Indonesia in partnership with Bank Mandiri and Bank Rakyat Indonesia, joining WeChat Pay which was officially granted a licence to operate in the country this January in collaboration with CIMB Niaga.

The growing number of players jumping on board with digital transactions bodes well for the Government’s National Non-Cash Movement launched in 2014. Go-Jek’s recent funding round and Facebook’s plans to build an e-commerce ecosystem around WhatsApp will help accelerate the adoption of digital payments for millions of SMEs in Indonesia, with businesses already using the popular messaging service to interact with their customers. Similarly, PayPal’s arrangement with Go-Jek will see the latter’s users use GoPay at PayPal merchants globally.

With the influx of foreign payment services and investment catering to higher consumer demand while creating the digital infrastructure needed to facilitate higher payment volumes, Indonesia is shaping up to be Southeast Asia’s next digital payments battleground. But what does this actually mean for businesses and consumers there?

 

Navigating a fragmented payments landscape

With all this consolidation and market movement, payment providers are innovating quickly to strengthen and enrich their offerings by partnering with others to develop their own unique payment ecosystems. Initially, these new partnerships will result in greater efficiencies when it comes to connecting consumers and businesses through one platform. But the fundamental pain point remains; the development of multiple payment ecosystems will continue to create the dilemma of choice. Consolidation in the truest sense of the word is yet to be achieved, and the payments landscape in Indonesia remains highly fragmented.

Since Indonesia loosened investment rules in 2016, foreign e-commerce players such as Amazon and Alibaba have entered the domestic market, competing against homegrown firms such as Tokopedia and Bukalapak. This has provided consumers with access to a wider variety of goods at more competitive prices.

To keep up with consumer preferences in Southeast Asia’s largest economy, merchants and payment service providers would need to evolve – by delivering a customer-centric experience where consumers are able to pay with the local payment method they prefer and trust.

In the long term, businesses should refrain from the drawing of battle lines in Indonesia’s fragmented payments landscape and create a payment ecosystem that takes into account payment preferences of the local consumers. Those who seek to enter multiple markets through one payments platform-as-a-service will be the ones most likely to succeed in capturing the lion’s share of the e-commerce market.

 

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