Cybersecurity principles in the banking industry

September 7, 2016 Uncategorized
Where do finance and cybersecurity meet?

Cybersecurity is important in the banking industry, but it's not normally equated with loan pricing strategies. However, cybersecurity training can serve as an important parallel to the risk-based pricing business, and not just because both industries operate based on risk. Cybersecurity experts and banking professionals both need to exhibit several similar characteristics in order to maintain effective operations.

Let's take a look at some key traits that cybersecurity professionals must have that can translate well to an effective risk-based pricing strategy:

It pays to be proactive

Cybersecurity best practices include being proactive when it comes to network security – it doesn't do anyone any good if they wait until disaster strikes to put up a firewall or invest in antivirus software. Therefore, if key decisions are made before the first piece of malware ever tries to infiltrate the network, security professionals can prevent attacks.

According to Centerstate Bank Correspondent contributor Chris Nichols, proactivity is also a key trait of professionals within the banking industry. By asking the right questions and figuring out the proper course of action for each customer, banks can price their loans correctly to minimize risk and maximize returns.

"Approach each borrower and find out what their plans are for growing their business or managing their property," Nichols wrote. "If the borrower has a longer term view, then the next question is what is their view and sensitivity to interest rates. If the borrower's free cash flow has a  high positive correlation  to movement in interest rates, then a floating rate loan would remain a better choice."

Then, conduct what-if analyses using varying assumptions and product types to structure a deal that fits the needs of the customers.  Pick the deal that maximizes the value of the customer relationship and minimize risk for the bank.

Proactivity can bridge the gap between risk and effective risk management.Proactivity can bridge the gap between risk and effective risk management.

Pay attention to trends

One of the most important characteristics of a good cybersecurity expert is that he or she needs to remain on top of current events and make sure networks are protected by the best, most comprehensive security strategies possible. New threats are emerging on a constant basis, and it's critical that cybersecurity experts stay abreast of the latest and greatest ways hackers are trying to weasel their way into the network.

Financial strategists have to operate under similar conditions. The economy is constantly shifting and reacting to current events, and loan prices and practices need to reflect these changes. According to accountancy expert Samuel Dundun Jr., trend analyses establish patterns within the industry and can help determine financial risk associated with current events. Banks should collect the right customer and loan transaction data to inform them of their market benchmarks rather than merely relying on stale historical data or broad industry benchmarks.

"It's critical for banks to recognize economic changes and assess how they impact the finance industry."

Constant vigilance!

If a cybersecurity expert closes his or her eyes for too long, a new piece of malware is created and might find a way to infiltrate company systems. According to security firm Trend Micro, during 2014 nearly 1 million new strains of malware were created every day, so remaining vigilant is key to maintaining a secure system.

Vigilance pays off for banks, as well. As the economy undergoes changes and customers' needs become more diverse, it's critical for banks to recognize these changes and assess how they impact not only the industry, but also the bank's risk and profitability. From here, making adjustments to pricing strategies informed by data analytics is the way to stay ahead of the curve.

Use the tools available to you

Cybersecurity professionals don't protect their companies' networks through sheer will alone. They invest in effective software solutions that allow them to utilize their knowledge to the greatest extent. Finance organizations also have the option – risk-based pricing and customer profitability software from Brilliance Financial Technology offers banks a way to dive into data in order to maintain consistent pricing practices and adapt to changing markets. DealPoint is a web-based solution that can increase productivity and quality of work, not to mention create more proactivity and vigilance within a banking institution.

For more information about the DealPoint software and how Brilliance helps banking professionals stay ahead of the game, get in touch today.