Financial Institutions are at an all time high for investments and technology decision making, yet most board of directors lack any experience in this area. Less than 6% of board members at the world’s biggest institutions have professional technology experience, per a recent survey, “Bridging the Technology Gap in Financial Services Boardrooms.” While IT continues to be the largest area of spend for most financial institutions, after people costs, only 11% of institutions had board level technology committees. So just how important is the board of director’s involvement in technology?
According to the regulators at a minimum the Board of Director’s are responsible to:
- Evaluate and approve the technology plan/strategy
- Approve major technology investments
- Evaluate technology risk and report (i.e. sign-off) to shareholders on security, cyber, mobile, and obsolescence, everything that plugs in….
A lot of things plug in, it is an increasing responsibility and it changes every day. In addition to the old standbys; core applications, ATMs, recyclers, online banking. We have constant new entrants to our market; IVTM, Mobile, ECM, cloud computing, insourcing/outsourcing, CPM, “digital technology” and dare we mention cyber security… And this is just a portion of the director’s responsibilities, additionally you are to be aware of the lines of businesses, regulations and strategy of the institution.
So, how do boards deal with the new normal? The first step is acknowledging, you need an infusion of technology capabilities. The second step is developing a plan to solve the technology gap. There are a few primary ways to quickly catch-up.
- Recruit for board members that have the knowledge that you need
- Talk to your internal IT resources, if they better understand the board’s level of knowledge, they may be better able to present information in a useful format
- Educate the board, members won’t become experts overnight but a basic understanding of the technologies and items to be aware of is necessary
- If appropriate resources aren’t available, seek out a third-party advisor to sit on the board in a non-voting capacity, to answer questions and provide training as needed
Technology isn’t going away, it will only become more integral in the business of banking, and the board of director’s decision making process. How you respond to the changing dynamics of innovation, core applications, compliance, cybersecurity and the competitive landscape will drive the success of your institution. To find out more about these systems or other ways that RSM can assist you with your business needs, contact RSM’s management consulting professionals at 800.274.3978 or email us