It is hard to think of a time when the role of the CIO has been more important to the current and future health of a major financial institution. In both offensive and defensive strategy – driving revenue and earnings growth and ensuring secure and effective compliance – the contribution of the CIO and his or her team is increasingly crucial.
The role of data and information is now integral across the business, from back-office to marketing and sales and from risk management to meeting stakeholder and regulators’ expectations
- Cost and efficiency: It is very clear that banks’ balance sheets are being completely reshaped by the major new regulatory initiatives which have followed in the wake of the financial crisis. In some cases, these are driving return on equity below the cost of capital. As a result, and in order to return to generating sustainable returns and acceptable levels of organic capital, banks have no alternative but to become leaner, simpler and more cost-effective in their operations. As a key enabler of process and workflow efficiencies, technology has a huge role to play here.
- Exploiting data: Mastering the massive increase in data flow and extracting the greatest value from it is fundamental to organizational health and success. The implications extend across the business operating model. At the front end, financial services firms face real challenges in managing and making sense of the vast array of information which can now be made available about the attitudes, behaviour and needs of clients, prospects and targets. Technologies such as data mining and data analytics are increasingly important as a foundation for effective marketing, sales and cross-selling.
- Managing risk: The financial crisis and the wide-ranging regulatory response have placed increased emphasis on the need for effective management of risk in all contexts: reputational risk, operating risk, regulatory risk. Companies now face the twin challenges of sustaining improved risk management and furnishing evidence of its effectiveness to stakeholders: regulators, clients, shareholders. Collecting, analyzing and presenting the relevant data is now indispensable to creating the foundation for strong stakeholder relationships.
- Customer relationships: Information technology and data management are fundamental to maintaining stable and responsive relationships with clients who are increasingly expecting continuous access to their financial service providers on a range of online and mobile platforms. Integrating the different interface technologies and grounding them on consistent, high-quality data are essential elements in creating fast, agile communications and decision-making. Consumers do not want complexity, delays or inconsistency. Companies that cannot implement the necessary systems quickly enough will find themselves squeezed out and facing further disintermediation by technical innovators, new entrants and new technologies, like we are seeing in payments or money transfer.
- Day-to-day operations: Fundamentally, optimizing day-to-day operations means maximizing the use of scarce resources and ensuring that people have the right information to make optimal decisions at the right time. This requires accurate and consistent data, which can serve both to underpin the operational health of the company and satisfy internal and external requirements.
The universal importance of good data and information management across the business operating model places a huge premium on the ability to collect, aggregate and analyze data to create a ‘single view of the truth’: one complete and internally consistent data and information resource which can satisfy all needs. Regulators are increasingly focusing on risk data aggregation, such as in the Basel Committee’s recent recommendations.  Whether it is a question of customer-facing operations, internal systems and procedures or external reporting, the winners will be those who can bring together data in a coherent way to serve these multiple needs most effectively.
"The universal importance of good data and information management across the business operating model places a huge premium on the ability to collect, aggregate and analyze data to create a ‘single view of the truth’: one complete and internally consistent data and information resource which can satisfy all needs.
The exponential increase in the volume of data necessary to the operation of financial services companies, together with institutions’ increasingly critical reliance on it, carry major dangers of their own. Companies are more and more vulnerable to the loss or corruption of mission critical data and at greater risk of reputational damage and regulatory sanction if they misuse it. Data and cyber security has to move from being a peripheral and technical specialism to a central strategic concern. Proper data security has to become as much a matter of business-as-usual as securing safes or locking filing cabinets.
Similarly, when internal processes, business-to-business communication and delivery of customer services all depend so critically on data and information technology (IT) infrastructure, maintaining its integrity is a key requirement in sustaining institutional security. We see only too frequently that when critical technology, such as a payments systems, fail, even for a few hours, the impact can be widespread and immensely disruptive leaks and loss of sensitive customer data breach the trust between institution and client and can carry significant financial penalties. Significant reputational damage can occur if these situations are not well handled.
As systems become more global and more interdependent, they begin to resemble the organizational and contractual connectedness which contributed so much to the creation of the financial crisis. It may not be too fanciful to think that the next major crisis may arise from IT vulnerability unless defensive measures are continuously upgraded. Here, where solutions often depend on major expenditure on IT and systems, it can be hard to quantify the need and demonstrate desired returns on capital. In a low-margin, high-complexity environment, the desirable risk-reward balance may not be immediately apparent. Nevertheless, investment to improve data security, reduce complexity and enhance the customer proposition are crucial if companies are not to be outflanked by braver or more farsighted competitors.
It is not all danger and defensiveness. The new technologies are the way of the future and if properly developed promise major improvements in internal efficiency, external reporting and, perhaps most significantly, customer relations and customer propositions. Whether it is further development of internet and mobile channels or innovative new technologies for payments, there are major potential benefits as well as risks. The role of the CIO is now to help define an institution’s core strategy against this rapidly developing background and guide investment decision-making on the basis of a clear view of risk and reward.
Technology, data and information management have been a core part of financial services for many years. They have just become more important still. Boards and executive management need to ensure they are accorded the same priority as any other critical success factor.
A leading example
One of the leaders in the new data management environment is the Commonwealth Bank of Australia. In 2012, the bank introduced a new technology platform to enable what it calls ‘real-time banking’ making the customer experience faster, easier and more secure. The bank’s CIO, Michael Harte, explained: “What people want [whether] at home or in the office or traveling overseas, anytime, anywhere [is to have] real-time richness and be able to increasingly do that through an interface that’s rich and mimics or re-presents the intimacy of what you once had [with] face-to-face banking and insurance and brokerage.” 
These investments paid off to the extent that the bank is now introducing a range of new functions and improvements building on new technology and near field communication (NFC) payment solutions. Harte commented: “We continue to invest in rich content and the back-end technology that enables us to deliver real-time value to our customers. Our strong platformance and security layers are at the heart of all our technology and have spearheaded the growth in consumer confidence in mobile banking services.” 
BCBS 239, Principles for effective risk data aggregation and risk reporting, BIS 2013.
CommBank CIO: Future of banking is real-time, personal, 24 August 2012.
CommBank extends lead in mobile banking and payments space, 17 October 2013,https://www.commbank.com.au/about-us/news/media-releases/2013/commbank-extends-lead-in-mobile-banking-and-payments-space.html