How the Microsoft Cloud Helps Banks Manage Risk

By Jacqueline O'Flanagan, Financial Industry Services Lead, Microsoft Canada
Tyler Pichach, Executive Director, Worldwide Financial Services, Microsoft

May 15, 2023

I think we can all agree that 2023 has been an interesting year for the financial services industry. The evolving global macroeconomic landscape of rising interest rates, inflation and volatility from geopolitical tensions has exposed the vulnerabilities and interdependencies of the world economy. These challenging circumstances, coupled with the recent collapse of major financial institutions in other countries have created shocks and aftershocks across global financial systems, to which our Canadian institutions are not immune. These events, and many others continue to underscore the importance of one major task here at home – risk management.

There is a lot at stake when it comes to managing risk. The repercussions of negative incidents can impact brand reputation, trust, and the bottom line. Risk management plays an essential role in safeguarding financial institutions from the broader market impacts discussed above. It also allows firms to identify, assess and understand suspicious activity like fraud, money laundering, human trafficking, and other forms of financial crime – it’s very serious business.

At Microsoft, we believe there has never been a more important time to discuss the risk challenges facing our financial institutions. In the face of these risks, many are also dealing with operational challenges including legacy systems, overwhelming amounts of data, complex analytics and increasingly high regulatory expectations. Paired with business expectations to reduce spend on IT while managing increased workloads, these factors create a challenging environment to navigate.

So how do risk teams address these challenges to best manage potential threats while still maintaining a competitive edge?

At Microsoft, we work in lockstep with many customers as a partner in risk management.

We are committed to supporting our customers in managing risk across three core areas: Risk Compute, Data and Analytics and Operations and Reporting.  Each of these are underpinned by our trust and compliance capabilities, that can only be delivered by the Microsoft Cloud. Let’s dive in.

Compute Capabilities are the Foundation for the Future of Risk

On-premises technology requires a high level of internal expertise and resources to manage cybersecurity risks and does not have the ability to scale and respond quickly to market events and regulatory pressures. Cloud adoption and compute capabilities are the foundation for the future of risk management.

The ability to run analytics across all data, with limitless capacity and speed is what our customers consistently tell us is the key ingredient to supporting risk. For example, TD Securities, part of TD Bank Group, required massive compute power to run its complex derivatives pricing application, so decided to transition to Azure to address performance complexity while also keeping infrastructure costs low.

The Microsoft cloud provides capacity on demand, helping financial organizations optimize their use and achieve significant efficiencies as well as enabling them to be more ambitious in the way they model risk and potentially respond to change.

Taking the Guesswork out of Managing Risk with Data, AI and Analytics

Of course, it’s not enough to only focus on boosting compute capabilities.  Financial services organizations need analytics to drive business performance, whether it be to improve capital management, reduce the cost of compliance, or quickly respond to market events. The changing nature of financial services requires analytics to surface the best information to inform on scenarios and business needs. 

Azure provides high-performance unlimited cloud compute to fulfill these needs with zero trust data privacy. With cloud-based solutions, financial institutions can run new methods of advanced analytics including new capabilities with AI and machine learning that can help teams react more quickly to various risks. For example, loan loss, credit and market risk management can require highly complex calculations that would take days to compute with legacy, on premise systems. But when it comes to risk, time is very much of the essence. Delays can cause banks –and markets – real money. With Azure, banks can run models and calculations within minutes, leading to better, more-timely risk management strategies.

Re-engineering Risk Operations and Reporting

Finally, regulatory expectations are higher than ever and the operational workload of compliance for financial institutions is significant. However, if data is accessible by the cloud, this process can be simplified, reducing the process costs and cyber risks of moving the data around. Digitizing eliminates paper and manual entry, which reduces risk, and automating outcomes and risk processes create better visibility and reporting, allowing risk teams to focus on other priorities.

A cloud-based financial services environment offers many benefits for organizations to manage risk and optimize financial crime prevention. The digital transformation of risk management alongside a trusted partner like Microsoft will become imperative for organizations to continually innovate and effectively manage the risks of today.

For more information on how to impact risk management strategies with technology, check out the e-book Redefining Risk Management in an Era of Data and Disruption.