Balancing the promise and risk of automation in Financial Institutions
20 June 2023As automation continues to redefine the operational landscape of Financial Institutions, the push for efficiency and cost reduction has never been stronger. While the benefits are substantial, from streamlined workflows to enhanced decision-making, so are the risks. Without the right governance, change management, and data integrity measures, automation can do more harm than good.
As Olivier Heindrickx, one of our experts, puts it: “The relevance of automation is just a question of cost-benefit ratio, in terms of processes, systems, and people.”
Automation: a potential goldmine
Many processes in financial institutions remain partially manual, leaving significant room for improvement. Automation and AI are powerful tools, with a 2024 Citi study predicting they could increase global banking profits by 9%, or approximately €155 billion, by 2028. Manual processes are not only time-consuming but error-prone and hard to scale.
When executed correctly, automation reduces cost-to-income ratios and frees up employees to focus on higher-value tasks across compliance, finance, and operations.
However, as Lance Wauters, Consultant aptly notes: “The benefits only materialize whenever automation does not (in)directly contribute to an increase in operational risk.”
Operational risks and pitfalls
Robotic Process Automation (RPA), Machine Learning (ML), and Artificial Intelligence (AI) offer great promises, but poorly implemented workflows can lead to counterproductive results. When automation projects are built without future-proofing or flexibility, especially on legacy systems, they can become liabilities rather than assets.
A major issue is overloading IT departments with support tickets, often negating productivity gains. In some cases, employees simply switch from performing tasks to managing IT incidents.
Elliot De Pellecyn, Consultant, warns: “The human factor determines whether automation reduces or reshapes operational risk.”
And over-reliance on automated systems creates vulnerability. A system crash or cyberattack, like TSB Bank’s 2019 incident, which cost over €122 million, can quickly derail operations. This concern partly inspired regulations like the EU’s DORA, which addresses ICT risk and system resilience.
Data: the engine and the risk
Automated systems rely heavily on clean, real-time data. As Jonathan points out: “Data lies at the heart of automation.” Poor-quality or outdated data can result in costly mistakes, particularly in markets where mispricing can lead to financial or regulatory fallout.
Beyond quality, data protection is a legal and ethical priority. Compliance with GDPR and similar regulations requires rigorous protocols such as pseudonymization, access controls, and monitoring. A data breach involving customer information could lead to severe penalties and reputational damage.
TriFinance can assist you in this journey. Read more about our services offering in Risk Management & Compliance in financial institutions.
Governance: building accountability into automation
With AI applications increasingly used in credit scoring, fraud detection, and operational decisions, clear oversight is non-negotiable.
Nathalie Gys, Risk Expert at TriFinance highlights: “Ensuring the traceability and explainability of AI-driven decisions is thus no longer optional. It is a regulatory and ethical necessity.”
The EU’s AI Act mandates transparency, documentation, and human oversight for high-risk systems. Institutions must embed governance structures, expert committees, model risk management, and comprehensive documentation to meet these standards and ensure accountability.
GRC tools (Governance, Risk & Compliance) offer centralized, AI-driven risk management. These platforms unify controls, automate task allocation, and enhance auditability, helping banks meet regulatory requirements while maintaining efficiency.
People: the make-or-break factor
Ultimately, successful automation is about more than technology. It’s about people. Without organizational readiness, new tools can increase, not reduce, risk. Structured training and change management are critical in empowering the first line of defense to use automation effectively.
Training improves awareness, promotes proactive risk identification, and ensures systems are used as intended. However, automation also places added pressure on IT support teams. Institutions must anticipate this and invest in backend capacity to avoid system bottlenecks.
Automation holds tremendous value for financial institutions, but only when approached holistically. The promise of faster, smarter, and cheaper operations must be balanced with governance, data integrity, human oversight, and change management. Without these, automation risks becoming a liability instead of a leap forward.
TriFinance ensures that financial institutions not only meet regulatory standards but also embed risk management into their strategic operations, fostering resilience and agility in an evolving risk landscape.
TriFinance can assist you in this journey. Read more about our services offering in Risk Management & Compliance in financial institutions.