More volatility and uncertainty in 2024: bank treasures must balance risk and innovation

(MENAFN- Golin Mena) Dubai, UAE-14th November 2023-If I were to describe 2023 using one word, it would be turbulence. Uncertainty and volatility are becoming the norm and will continue to dominate headlines in 2024. The International Monetary Fund (IMF) expects the headline inflation to decelerate to 4.8%, while global economic growth will slow to 2.9% in 2024, from an expected 3%. However, we are not out of the woods yet.

Besides the turbulent economic climate, according to a Deloitte study, technological turbulence underpinned by Gen AI, transition to the cloud, increased fraud, and cyber risk, will also dominate the board agendas. Banks need to use the experience they have gained to balance risk and innovation and become more agile. For example, 2023 shone a light on the importance of effective Asset Liability Management (ALM), and we will continue to see significant investments in this area. To optimize the balance sheet, banks need to move beyond compliance and take a closer look at key metrics on a more frequent basis. Community banks, mid-tier banks and top-tier banks may also have different approaches to ALM.

In 2024, I expect to see banks and decision makers look at ALM through the lens of viability. To achieve long-term growth and success, banks will invest in innovation and new technologies that manage risk and optimize their balance sheets. Cloud-based SaaS solutions enable banks to optimize positions under multiple regulatory constraints, shield from risk and be better equipped to serve the needs of the community, including private individuals and small-medium enterprises (SMEs).

Institutions will need to leverage new technologies and tools to measure and monitor liquidity, interest rate and FX risks in the balance sheet. By using technologies such as artificial intelligence – including generative AI (Gen AI) – and machine learning, banks can analyze the past, monitor the present and prepare for the future. According to a McKinsey report, Gen AI could also reduce the industry's costs by $200bn to $340bn per year. The good news is that banks don’t have to follow a big-bang approach. With microservices and composable banking, institutions can enhance agility, scalability, innovation and speed of deployment by breaking down applications and services into smaller parts. As a result, banks can react quickly to economic events and adjust risk accordingly, while ensuring their long-term growth.


Golin Mena

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