Yogesh Mudgal Q&A
Interview with Yogesh Mudgal, Director, Emerging Technology Risk at Citi
What do you feel is the greatest innovation to operational risk in 2019?
Increased recognition and the need for enhanced alignment of risk functions with new business models, and the creation of specialized functions like Emerging Technology Risk are some of the crucial developments in Operational Risk in 2019. The Emerging Technology Risk function is being adopted, advanced, and operationalized across various financial institutions. With the piloting and deployment of new business models using emerging technologies, the opportunity and innovation lies in the field of Emerging Technology Risk by front-ending the projects from the risk perspective. This is done by identifying, evangelizing, and building guardrails for managing risk with emerging technologies.
Exploring the use of emerging technologies to enhance operational risk activities is gaining ground in the industry, and will lead to innovation in risk management.
What impact do you feel technology has on risk and why?
Technology in general, and emerging tech in particular, can have a significant positive impact on risk management. Artificial Intelligence/Machine learning (AI/ML) are transforming existing business models and processes, or helping to create new ones. Risk functions plan to leverage or, in some cases, are already using AI/ML and other emerging technologies for analysing data, making predictions/decisions, identification of potential risks issues from central data warehouse, and automation of risk activities. The increased acceptance of the public cloud by the financial institutions to host data and applications, provides opportunity to enhance risk management by exploiting cloud benefits of scalability, efficiency, a large array of cloud services, and storage space.
How do you envisage the future of risk?
With the adoption of emerging technologies, changing business models, and evolving regulations, the importance and challenge of managing risk is going to increase in the future. The agile method of deploying new systems, and processes could also increase risk exposure, which will require oversight for identification, prioritization, monitoring, and reduction of potential risk. The Time to Market for technologies is reducing with relatively faster adoption rate of new products or technologies, requiring a faster response and adaptation from the risk departments. There is increased focus from regulators to supervise and monitor risks with new business models and emerging technologies, which may lead to the publication of new guidelines or regulations. As the world of business, regulations and technology evolves, the risk function will have to become adaptable and aim to increase resiliency and reduce risk.
What emerging trends have you identified within the context of risk?
There is increased focus, research, and planning in identification of risks with machine learning, and other technologies in AI like NLP, Chatbot etc. As threats against AI/ML are identified and new research is conducted, there is a need and a trend to consolidate and understand emerging threats to drive risk management of emerging technologies. As some financial institutions are looking to deploy a large array of cloud services made available by Cloud Service Providers, the scope and scale of risk exposure could increase and it needs adequate oversight and challenge. Accordingly, there is increased focused on cloud governance, security, privacy and evaluating cloud strategy from a risk perspective.
In addition, risk appetites are being developed or enhanced to account for emerging threats, and changing technology/cyber landscape. Identification, and management of emerging risks is gaining increased focus as risk functions become more proactive.
How do you feel innovation has impacted the roles and responsibilities within the risk department?
Innovation in business, and technologies is driven by efficiency, new value propositions, new business models or competition. Innovation inherently involves taking risk, making the risk department’s role challenging and increasingly important. Risk departments are modifying their organizational structure to better align with businesses and to enhance engagement and front-end the deployment of new products to identify and manage risks. The changing environment has created the need to develop new specialized functions like emerging technology risk.
What three key takeaways would you offer to readers?
1. Create or enhance the knowledge sharing platform with other institutions to stay abreast with latest trends, and innovations in risk
2. Explore the use of emerging technologies to create new opportunities, and enhance the risk management effectiveness and efficiency
3. Enhance engagement with the businesses to understand immediate plans, and the strategic direction of the organization to accordingly adapt risk management activities and plan.