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HOW FINANCIAL SERVICES CAN GET TO GRIPS WITH RISING SUPPLY CHAIN RISK

FINANCIAL SERVICES

By Alex Saric, smart procurement expert, Ivalua

 

UK businesses have never been more dependent on their suppliers to help them deliver goods and services to their customers. Be it retail, manufacturing or financial services, suppliers have a vital role to play when it comes to innovation and meeting customer expectations. However, as supply chains become increasingly global, businesses are potentially exposing themselves to more risk than ever before.

This is especially true in financial services. Whether it’s the impact of geopolitical events like Brexit or global tariff wars, supply shortages, security or the businesses impact on the environment, an organisation’s failure to identify and mitigate risk could see millions wiped off its share price, and its corporate reputation left in tatters. Risk can present itself anywhere and at any time, so financial services firms must be ready to address it. However, many simply don’t have the ability to evaluate suppliers for risk factors, leaving them wide open to business operations being hindered, or being slapped with financial penalties.

 

More suppliers, increasing risk

One reason why financial services firms aren’t able to evaluate suppliers is the breadth and scale of today’s supply chains. For example, French oil company Total said in in a recent human rights briefing paper that they work with over 150,000 direct suppliers worldwide. This is just one example of how large and varied the roster of partners has become. Research from Ivalua has found that financial services businesses on average are working with around 3,600 suppliers annually, which is evenly split between UK-based and international partners. That number is expected to rise, with 60% expecting the number of suppliers they work with to rise.

The expanding nature of suppliers is only going to expose financial services firms to more potential risk than ever before, yet 78% say they face challenges gaining complete visibility into suppliers and their activities.

A lack of supplier visibility leaves businesses unable to identify and mitigate against supply chain risk. In fact, almost three-quarters (73%) of financial services firms have experienced some type of risk during the last 12 months. These include; supplier failure (43%), environmental impact, such as pollution or waste (35%) and supply shortages (45%). Supply shortages can be among the most damaging to a business, as seen by both the KFC chicken shortage which closed stores, and the summer 2018 CO2 shortage which caused companies such as Heineken and Coca-Cola to pause production, impacting supply across Europe during the World Cup.

 

Businesses unprepared for the worst

One way financial services firms can better prepare for risk is to ensure they know what to plan for to reduce the impact. However, whilst some say they have a contingency plan in place to deal with risk, many of them are unprepared. Financial services firms admitted to not having comprehensive and deployed contingency plans in place to prepare the supply chain for risk such as; natural disasters (68%), supply shortages (67%), geopolitical changes (65%), environmental impact (63%), supplier failure (62%) and modern slavery (50%).

In order to effectively prepare for these types of risks, it’s vital that financial services businesses fully understand their suppliers, their business environment, global variations in regulations, geopolitics, and a host of other factors. But for many, there are multiple challenges when it comes to gaining this understanding. A prevailing factor is an inability to gain visibility into all suppliers and activity because supplier management data is stored in multiple locations and formats, making insights difficult to access. This leaves teams unable to review supplier activity and assess compliance.

 

Making supplier management smarter

It’s imperative that financial services businesses are able to respond or prepare for supply chain risk. Clearly, much more needs to be done to ensure they have complete visibility of suppliers, especially in an era where regulators can levy heavy fines for GDPR breaches and scandals spread in minutes over social media. These types of risks can be reduced in the future if procurement teams have a 360-degree view of suppliers which will help with contingency planning and risk management.

For example, in the instance of supply shortages, plans could be put in place that identify alternative suppliers to ensure any shortages do not impact end users. This type of supplier collaboration is paramount when it comes to managing and mitigating against supplier shortages. When it comes to regulations, financial services firms can’t allow a lack of visibility to limit their ability to ensure all suppliers are compliant.

To do this, teams must take a smarter approach to procurement that gives complete visibility into suppliers throughout the supply chain. This will allow financial services firms to identify and plan for risk, reducing the potential damage, and ensuring they are working with and awarding business to low-risk suppliers. Supply chain risk is rapidly becoming an overarching concern for financial services firms, but by providing the ability to assess suppliers, they will have all the insights they need to mitigate the impact on business operations.

 

Finance

2020: THE YEAR OPERATIONAL RESILIENCE AND CYBER-RISK TAKE CENTRE STAGE IN FINANCIAL SERVICES

Miles Tappin, VP of EMEA for ThreatConnect, explores how financial providers can build a cyber security strategy that enables operational resilience

 

Financial institutions are operating in a new digital landscape. New disruptive technologies – from Artificial intelligence (AI) to crypto-currencies and big data – have driven change and innovation. In retail banking, new fintech providers have seized the opportunity to offer personalised services and challenge existing providers. For example, Klarna, has successfully disrupted the payments sector and is now established as Europe’s biggest fintech firm. It has quickly emerged as an alternative to credit cards since bursting onto scene, allowing consumers to shop now and pay later with retailers, such as H&M, Ikea and Zara.

To compete with the rising number of fintech providers and fulfil growing consumer expectations, traditional financial institutions are developing robust digital ecosystems that can deliver omnichannel service models. However, it’s becoming clear that the pace of technological change is a double-edged sword. It enables innovation and change but it is also one of the most destructive forces in the financial services ecosystem today.

 

Financial services emerge as a hotbed for cybercriminals

2020 has emerged as a defining year for cybersecurity in the financial services industry. It started with an unprecedented attack against Travelex where hackers successfully took some of the currency providers offline for nearly a month. Then came Coronavirus which sparked a new wave of malware and phishing threats. Research from VMware Carbon Black Cloud revealed that threats against financial institutions have surged by 238% since the start of the pandemic.

The renewed interest from cyber criminals comes at a time when regulators are paying close attention to the resilience of the sector. After a string of IT failures and breaches, financial organisations in the UK have been given a mandate from regulators to improve operational resilience. This means ensuring business models can withstand disruptive events from hackers or adversaries and quickly recover to protect the stability of financial systems.

In December 2019, the UK’s financial regulators published a series of consultation papers outlining their proposed approach to achieving greater operational resilience. The proposals suggested that financial institutions will be required to map out the systems and processes that support business services in order to identify any potential vulnerabilities that would pose a risk to the stability of the UK financial system or the firm’s standing.

 

A mandate for change

Where cybersecurity used to be a classic back-office concern, it’s now a central part of digital strategies and a key pillar of both reputation and customer retention – financial legislation leaves no room for failure. All financial institutions need to ensure they have full visibility of their systems and can detect any potential threats.

The challenge for financial institutions is making the security tools they have purchased separately work together in tandem. Security teams buy a firewall, an email filter, threat intelligence feeds, antivirus software or enhanced endpoint protection, and whatever else they need individually. Each of them does a good job but they don’t talk to each other and valuable time is lost tending to individual systems that become a burden to run. At the same time, running multiple security systems is expensive. The more systems you have, the more highly skilled staff you need to manage them, and they’re few and far between.

 

Improving intelligence sharing across borders and communities

To reduce complexity and simplify decision making, financial organisations need to unify processes and technology to harness the security intelligence that comes from across their own security programmes and external sources to drive down risk. However, no financial institution can tackle the problem alone. Experienced threat actors using advanced techniques are constantly targeting the financial sector. The industry needs to come together as a whole to foster a sense of collaboration and data sharing.

In the same way that financial institutions have introduced open banking to deliver a fairer service to customers, the same needs to apply to security – all parts of the financial ecosystem need to unite and share information to learn from one another and succeed in the fight against adversaries that operate across borders.

By sharing alerts on cyber hazards and risk across financial institutions and with law enforcement, government agencies and other relevant authorities, it’s possible to build industry specific insights into cyber security threats and quickly pivot to gain more information on those specific threats and threat actors. By working together, a picture can be painted on threats coming from all manner of malicious activity, from malware to ransomware, to phishing and software vulnerabilities.

 

Breaking down barriers

Having the right intelligence is not enough to ensure that intelligence is turned into action. Breaking down information and process silos across security teams allows financial organisation to analyse and act on the most pertinent information. Everyone has access to the risk and threats that matter most, and orchestration and automation of response helps overwhelmed security teams prioritise response plans and improve efficiencies in their security programme.

Integrating internal security tools and technologies, while also connecting to external sources of intelligence, creates a single source of intelligence that feeds operations and enables organisations to direct action against the threats that matter most. The outcomes of those actions further feed intelligence, providing the ability to further refine the efficacy of the entire security lifecycle.

This approach provides a continuous feedback loop for the people, processes and technologies that make up the security programme. It allows financial institutions to keep up with threat actors that have consistently adapted their methods to profit at the expense of the financial industry. Something that won’t stop anytime soon.

 

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Finance

GROWTH OF FINANCIAL MARKETS AND TECHNOLOGY

Ashish Jain,CEO, Future FX

 

The economic development of any nation completely depends on its financial structure both in long term and short term. The financial system and its efficiency determines the success of the nation in terms of economic growth.

As most of the sectors are taking advantages of the technology evolved since 1980, financial sector has also transformed immensely.

The Bombay Stock Exchange (BSE), dating back to 1875, started as a broker’s forum under a tree on Dalal Street, and is Asia’s oldest stock exchange. For over a century, registered brokers have made trades happen.

The National Stock Exchange (NSE) came up in 1994 to provide screen-based electronic trading. It gave fibre-optic access to brokers in other cities who could join the trading in the centralized exchange located in Mumbai.

Dematerialization of shares started in the late 1990s and online trading began at the turn of the millennium where investors could buy and sell shares through electronic brokers such as ICICI Direct and Sharekhan.

As more and more elements of the stock market get digitized, it increases its potential to attract a new generation of investors.

Online financial services company Zerodha brought “discount broking” to India in 2010, applying a flat fee of ₹20 on a trade whatever its size. This attracted young investors who could do a trade in less commission. Now, we have all the marketing and trading apps on our phones and we can easily make trades.

The insurance sector has eliminates the role of broker and now anyone can buy insurance through mobile phones. Some such apps are HDFC ERGO insurance, Insure, Caringly Yours, etc.

Trade has always been shaped by technology but the rapid development of digital technologies in recent times has the potential to transform international trade profoundly in the years to come.

From the moment we wake up to check how the markets performed overnight until the time we go back to bed before doing another check of how the market is set to open on the other side of the globe, technology now plays a critical role in everything we do and the way we do things.

For the financial markets, the coming of advanced technology has been the key factor behind the transformation in the way things are done. Technology is also at the core of how companies operate and maintain their competitive edge in this vicious environment.

While forex trading and trading in general used to be the domain of institutional and corporate players, today even retail and private investors consider forex an essential component of their overall portfolio. And this is no doubt due to the ease of access and price transparency offered on the electronic platform.

Nowadays, providers need to have the latest technology all the time. They need to add new and build more features to their platform to attract and retain clients.

Traders are now able to monitor their trades from anywhere as long as there is an internet connection. This gives traders more freedom, mobility and flexibility.

The trading in global markets has thus become easy and convenient like never before.

 

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