Resilient Banking Through Digital Resiliency and Governance Improvement

Resilience is defined as the ability of a system, community or society exposed to hazards to resist, absorb, accommodate to and recover from the effects of a hazard in a timely and efficient manner, including through the preservation and restoration of its essential basic structures and functions. A resilient banking system is one which can absorb the impact of endogenous shocks it is exposed to, rebound quickly to the original condition or adapt to new environments, and continue to perform its role of providing banking services. This definition of a resilient banking system is different from a stable banking system. A stable banking system is one which can absorb shocks, whereas a resilient banking system will be able to adapt and reconfigure itself in response to a shock, in addition to absorbing the shocks.

Objective is to focus on building a banking system based on digital technology which is not just stable, but resilient, as the type, source, magnitude and frequency of shocks are turning out to be highly unpredictable and non-measurable to a significant degree. 

As the pace and frequency of disruption continues to increase, digital technologies will constitute a critical element of business continuity and organizational resilience to sudden external shocks. Digital transformation is only as good as the ideas that drive it. Digital resilience requires that digital products and services function in the times and places where people need them most. When Bank’s digital products and services don’t work or aren’t available to those who need them, unintended consequences occur due to most common challenges typically relate to three things:

• Resources: Don’t have the latest technology, infrastructure, budgets, or other resources necessary to sustainably transform their organization in the digital age.
• Capacity: Overworked teams don’t have the people power to implement good processes that will support this transformation over time. 
• Knowledge: Teams struggle to keep up with always-changing “best practices” in an ever-evolving technological landscape.

These challenges take many forms within the organization.

• Security Risks: Neglected digital products and services become outdated, leading to potential security breaches—like a website hack—that put important stakeholder data at risk. 
• Access to Information: Teams that can’t effectively manage their digital products or services are unlikely to prioritize accessibility, uptime, user experience, or other strategies that provide instant access to key information. 
• Technical Debt: Over time, technical debt slows down products, making them unresponsive or unpredictable, undermining users’ ability to accomplish tasks. 

When left unchecked, these issues cost organizations time, money, and resources. In extreme cases, exorbitant regulatory fines or lawsuits happen. 

Digital resilience has also become increasingly important as organizations started conducting the majority of banking services online nowadays.

To ensure business continuity, resilient banks prioritize the availability of not only the digital products and services the bank creates, but also those in its digital supply chains—hardware, software, third-party products and services, agency partnerships, vendors, suppliers, and so on. 

Most importantly, good governance practices drive resilient banks. Given the level of risk and far-reaching potential consequences, this is not surprising.

The 3As Model of Resilience

• Anticipatory Capacity: The ability of the banking system and its constituents to identify and measure emerging risks as early as possible and mitigate the risks by taking corrective actions. 
• Absorptive Capacity: The ability to withstand the losses which may arise due to shocks which cannot be mitigated or avoided.
• Adaptive Capacity: It helps in adjusting to the new realities, be it changed regulatory/economic conditions or a new competitive landscape.

Three Dimensions of Banking Service Resilience

• Service Development and Engineering Resilience: Embracing resilience in software development is not just a best practice but a strategic imperative to meet the evolving expectations of users and maintain compliance standards and a competitive edge in the fast-paced technology landscape.

- Employing microservices architecture and containerization can enhance flexibility and isolation, contributing to overall system resilience.

- Applying design resilient architectures and resiliency design principles in software development.

- Adopting DevSecOps Automation pipeline in software development life cycle.

- Creating Project Management CoE to oversee the service development.

- Creating Enterprise Architecture CoE to oversee the service development.

- AI-Driven, Cloud-Native, Event-Driven, Decentralized with Blockchain/DLT, Composable/API First, Omni-channel/Mobile First, Sustainability-Driven (ESG), Privacy & Secrecy First, Human-Centric and Experience-Driven First, Observability/Telemetric First, Automation & Reusability First

• Service Delivery Resilience: Adopting DevSecOps Automation pipeline in software development life cycle till service is available in production systems for users/customers continuously.
• Service Assurance - Operational Resilience: The ability of the banking system to continue providing products or services while dealing with unexpected internal or external disruption. This area of risk management and disaster response also involves anticipating such events and either preventing them or creating an effective response plan. Employ automated monitoring and alerting into operation.

Seven Strategies to Improve Digital Resilience

• Run a Risk Assessment:

Audit the digital components of the bank to learn which are most at risk. Identify those most vulnerable to misuse or neglect. Collaborate with internal and, if applicable, external stakeholders to perform this assessment. 

To ensure that your risk analysis doesn’t end up on a shelf, make it actionable. Collaborate on solutions, assign tasks to team members, and schedule regular check-ins to monitor progress.

• Create a Code of Ethics:

Centre bank’s digital resilience strategy in a clear set of responsible guidelines that internal and external stakeholders can get behind. The risk analysis process will probably reveal organizational weaknesses and a chance to improve the bank's policies and practices. Onboard team and other stakeholders to improve adoption. Better yet, collaborate with them to co-create the guidelines.

• Shift from Project to Product Models:

Digital products are never “done”. Banks that do not appropriately resource its digital products and services over time often pay a steep price. Product mindsets require banks to think differently about how it resources and funds digital product development.

Good product management practices can keep banks from contributing to software bloat and building features that no one will use.

• Build a Knowledge Base:

Technology is complicated. It changes regularly. So do team members. Organization wastes huge amounts of time and resources training (and retraining) teams on common digital practices. This undermines digital resilience.

Address team transitions and evolving processes by investing in online training and documentation for key digital practices and processes. This will help organizations improve employee onboarding. It will also give the team quick access to information that helps them more effectively do their jobs. In turn, this will help teams maintain and manage more resilient practices. 

• Prioritize Security, Accessibility, and Data Privacy:

Improved resilience is a natural side effect of placing a high priority on data privacy, secure technology, and open access to information. Not only will banks boost digital product and service availability, but banks will also comply with current and emerging digital accessibility and data privacy legislation like the DPDP Act.

• Create Strategic Partnerships:

Bank is consistently pressed for time. Banks must do a lot with a little. Strategic partnerships can help banks fill gaps in capacity, knowledge, and resources by co-creating solutions and aligning banks with reliable partners who share your values. Build relationships with ethical, like-minded partners that complement the bank's strengths (and weaknesses). Plus, good partnerships grounded in trust and mutual respect can help banks more easily create shared value and help each other make a measurable difference.

• Develop an Innovation Practice:

Innovation breeds resilience. Banks should consistently nurture human-centered design and innovation practices within its various departments and teams tend to be measurably more effective in managing digital disruption.

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