As financial institutions increasingly embrace a tech-first operational model, the traditional governance frameworks designed for an analog or early-digital age face significant strain. This pivot, while driving efficiency and enhancing customer experience through rapid digital transformation, introduces a complex web of new challenges for oversight and control.
One primary hurdle is the sheer speed of technological change. Governance structures, often built on slow, deliberate processes, struggle to keep pace with agile development cycles, frequent software updates, and the continuous integration of new tools like AI and machine learning. Ensuring that new technologies are assessed for risk, compliance, and ethical implications before deployment requires a fundamental shift in governance processes.
Integrating technology deeply into core banking operations also magnifies the importance of data governance. With vast amounts of sensitive customer and transactional data flowing through complex digital ecosystems, robust policies are needed for data collection, storage, usage, security, and retention. Ensuring data integrity and privacy becomes paramount, demanding constant vigilance against breaches and misuse.
Furthermore, the tech-first approach necessitates a re-evaluation of risk management. Traditional risk frameworks must evolve to encompass new threats, particularly cybersecurity risks which are constantly evolving. Operational resilience, the ability to maintain critical functions during disruptions (whether technical glitches, cyberattacks, or external events), becomes a central governance concern, requiring rigorous testing and robust recovery plans.
Organizational structure and culture also pose governance challenges. Breaking down silos between IT, business lines, risk, and compliance is crucial, but requires intentional leadership and change management. Ensuring the board and senior executives possess sufficient technological literacy to understand the risks and opportunities presented by new tech is also vital for effective oversight.
Finally, managing third-party risk is complicated by the heavy reliance on external tech vendors and cloud service providers. Governance needs to extend beyond the bank’s internal boundaries to ensure these partners meet stringent security, compliance, and operational standards. Regulatory compliance itself becomes more intricate as regulators adapt frameworks to the digital age, requiring banks to navigate complex and evolving rules around data protection, operational resilience, and digital conduct. Effectively navigating these evolving landscapes requires proactive, adaptable, and technologically informed governance practices.
Source: https://www.helpnetsecurity.com/2025/06/16/rich-friedberg-live-oak-bank-banking-cyber-governance/
