Investment banking industry is one of the most advanced industries. It is constantly upgrading itself. So there’s no doubt that it is one of the early adopters of technology. The COVID-19 outbreak has accelerated the pace of technology investments. Consequently, investment banks and other financial institutions are seeing an increase in investments in technology. However, this adoption of technology comes with associated investment banker risks.

According to a report, in 2022, North American banks will spend roughly one –half of their total IT budget on new technology. Similarly, European banks are expected to spend 27 percent higher than their current level. McKinsey Global Survey reports the share of digitally enabled products has increased by a shocking seven years.

The risks investment banking industry faces 

While technology offers a solution to many business problems, it is tricky to implement. Thus, banks require sophisticated risk management, IT resilience and continuity planning, burgeoning security requirements, and more. Evolving customer expectations, competitors, and constantly changing regulations add to the risk. These risks are also investment banking opportunities in disguise. 

A few of the hurdles while investing in technology includes:

Time constraints

Customers are increasingly looking for convenience that forces investment banks to provide customers with digital access for products and services for all available devices and platforms. Banks can’t afford to deploy software for several months. An effective software delivery pipeline for fast and small releases is a real challenge.  

Investment costs

Typically, the budget for technology is less. Competing banks can surpass the bank by reducing its operating cost and buying what they need as and when they need. 

Cybersecurity

Investment banks keep a repository of highly sensitive customer information, which invites attacks from hackers and constant cyberattacks. Thus, banks are constantly at risks. Investment banks have not kept pace with evolving security risks. 

Lack of skills

Investment banks find limited technological expertise in house, while constantly evolving technology demands newer skills. Investment banks often outsource tech talent, which produces inconsistency, lowers quality, and duplicates efforts.  

To overcome these challenges, investment banks have to balance their technological advancement. Managing risks associated with the adoption of technology comes naturally.

Risk management and investment banking opportunities

If we could identify risks in its different forms, it will present us with different opportunities as well. Here are a few ways to turn investment banker risks into opportunities.

Transform legacy systems

Legacy systems are expensive to manage and complex to modify. Investment banks can work towards simplifying the system and gradually develop and release functionalities to meet the demands of the market. 

Acquire a SAAS-model 

The cloud-based model helps the organizations to quickly test, adapt, and take innovations to the market at minimum costs.

Deploying cloud-based models is quicker, convenient, and more readily accessible than on premise models. It can be also be deployed at a fraction of the cost than traditional models.    

Implement AI-based automation 

Automation can reduce the effort and propel banks to scale –up their operations faster, reaping high returns. Banks can develop stringent governance structures, encourage workforce, and comprehend potential bias in AI-powered algorithms. 

Attend to cybersecurity-related issues 

Big data analytics comes handy in identifying risks. Banks can collaborate with big data teams to assess risk, design solutions to measure and reduce risk, and keep data safe. 

Final word

Overall, risk management has changed substantially over the last few years. Investment banks now have effective strategies at their disposal that can mitigate the risk significantly and increase a bank’s bottom line. To emerge successful, banks need to take initiatives. Most of these technological advancements when applied can help banks and help them gain a competitive advantage. 

The initiatives will work even better if complemented with tech-savvy investment banking professionals, which would require change in recruiting criteria.