Top 5 Risks Facing Banking/Financial Services

I had the pleasure of interviewing David Reiling, Chairman and CEO of Sunrise Banks who is a social entrepreneur with a long history of innovation in community development finance. David has been recognized by Trust Across America as one of “Top 100 Thought Leaders in Trustworthy Business” for the past five years receiving a lifetime achievement award in 2018, earned an Ernst & Young “Entrepreneur of the Year” award, and earned the Corporate Citizenship Award from the U.S. Chamber of Commerce’s Center for Corporate Citizenship. He is a recognized leader in opening the doors of financial inclusion and financial wellness. David has built his social enterprise on the premise that everyone can gain access to convenient, transparent and reasonably-priced financial services nationally and globally.

Thank you so much for doing this with us! What is your “backstory”?

My interest in banking started when I was a teller one summer while home from college. I loved it! Being face-to-face with customers and their money in a busy urban bank that got robbed occasionally was thrilling. After I graduated, I worked full-time for First Interstate Bank in LA. During my first two weeks on the job, the branch I worked in was robbed three times. I thought this was normal given my prior summer experience. The district manager was impressed with the way I handled the situation and transferred me to South Central LA, the bank robbery capital of the world. Every day was exciting in South Central, between customers, riots, gangs, robberies, and an occasional earthquake. After being in one too many threatening encounters, I decided it was time to stop pushing my luck. I moved on to Citibank in Downtown LA where I grew my experience including, international banking experience. After a while, I had my sights set on Citibank, New York. Before I could leave, my dad asked if I was interested in buying a bank in the Frogtown neighborhood of St. Paul, MN and I took it. At first, we mainly worked in that neighborhood, helping Hmong immigrant families to get houses, start businesses and thrive in the US. We embraced the philosophy that if our community succeeds, the bank will succeed. The mindset of helping others succeed is still at the core of what we do today.

What do you think makes your bank different in these disruptive times? Can you share a specific story?

Sunrise Banks is a social engine for good. Yes, we are a bank, but we work to innovate every day to do more than simply provide banking services. Part of that innovation is listening to our customers, to our communities and to the industry. We explore innovative tools and processes through partnerships with fintechs to make sure that we are able to meet our customers where they are and help them take control of their financial wellness.

What are the risks that boards are currently concerned about in the Market, Liquidity, Credit, Operational, Financial and Compliance risk categories?

While the concerns of each board are unique, there are a few areas that are concerning to every organization. The first that comes to mind is compliance. Many of the regulations that banks have to consider every day are changing or being examined at increasingly higher standards. Additionally, with many banks relying more and more on digital systems and following the recent high-profile data breaches, every board should be concerned about cybersecurity.

What are the risks that you are concerned about in those same categories over the next three years

For Sunrise, one of our major strengths is compliance. We take many precautions to ensure every action is adhering to regulations and that all products take the upside and downside risk into consideration. With changing regulations, our compliance teams are on the lookout for major changes that we have to react to. We take a proactive approach to risk, going above and beyond many regulations to make sure that new challenges and changes don’t upset our operations. We also take time to work on reducing operational risks, especially those surrounding stability and cybersecurity. Making sure that we have the operational stability to support national and international product offerings is a large challenge, one that is increasingly difficult for a smaller innovative bank. Our enterprise risk management focus helps keep Sunrise agile and adaptable, regardless of the risks we face.

In your view, should Conduct risk be among the top risks to be concerned about? Can you elaborate or share a story?

Conduct risk is an important area to monitor. Not only can it bring huge fines and possible regulatory action, but it is a massive public issue. The reputation damage that conduct risk presents is very serious, with increased public attention to news stories related to infringements and discoveries. Another aspect that makes it so dangerous is that conduct risk infringements can stem from the actions of single individuals within otherwise trustworthy organizations. Managing conduct risk goes beyond simply making sure offerings adhere to regulations, it requires building culture and establishing behaviors around risk management.

Building a “Lean Risk Culture” is crucial in strengthening risk management practices at a holistic level. What is your approach in building a lean risk culture? Can you share a story or example?

You’re absolutely right about the importance of building a lean risk culture. At Sunrise, we incorporate a risk assessment into every new idea and process. By making sure the potential for risk is considered at every stage of a development cycle, maintaining a lean risk process is much simpler. Traditionally, risk would be one of the last considerations of product development, looking at the final product and tweaking it to reduce risk. To stay agile and make sure risk is mitigated, we are constantly thinking about how to further reduce our risk as we explore new ideas to post production. I have to hand it to our compliance and risk departments, they are continuously reviewing their own processes to maximize efficiency while not skipping any steps in risk management. The future for all banks will lie in the strength of their compliance and ability to deal with risk in an increasingly fast industry.

With an increasing amount of data breaches and financial crimes , what do you think is the most effective way to manage this risk ?

It may seem simple, but managing cybersecurity risk requires constant research and making sure your risk strategies are on the forefront of technology. With the speed at which technology changes every day, our team is constantly listening and adjusting our processes to prevent incidents. As evidenced by recent breaches, we’ve seen the need to walk a thin line between transparency and creating a panic; customers want to know when they are at risk, and if you don’t tell them, they’ll find out another way. Taking control of your risk management also requires efficient and accurate communication, to maintain reputation and integrity through a period of crisis.

Can you name one area within risk management that will see the most benefit due to advances in technology?

We talk a lot about regulatory tech, or regtech. The advances in technology surrounding artificial intelligence and machine learning allow for not only more efficient compliance processes, but also processes that are built into the products we offer. This allows for more effective risk management and streamlines the processes for both us and our customers. Harnessing these advances makes for a better and safer customer experience.

Can you please give us your favorite “Life Lesson Quote”?

Luck happens when preparation meets opportunity — Roman philosopher Seneca

Some of the biggest names in Business, VC funding, Finance, and Investors read this column. If you could have private breakfast with someone who you consider really successful , who would that be and why? He or she might just see this.

I would love to talk to Blackrock CEO, Larry Fink. He has recently stated that companies must work to have a purpose beyond profits and that focus begins with the CEOs. It ruffled a lot of feathers, but loved what he said. I would love to discuss his vision for companies driven by purpose over profit.

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  • Breana Patel

    Founder and CEO Bonova Advisory- Risk and Regulatory Advisory ?

    Founder of Bonova Advisory that specializes in helping companies navigate complex Regulatory, Risk and Operational Environments. Industry expert in Banking Regulations, Enterprise Risk Management and Technology disruptions via RPA, AI and Blockchain. I write on evolving Financial eco systems in this 4th Industrial Revolution