7 Steps to Building a Risk-Aware Fintech Culture
Note: This article is the third in a 4-part series designed to help fintech companies forge lasting relationships with financial institutions and build trust with consumers.
As your Fintech grows, the pains and challenges of compliance grow with it. Whether you’re being asked for a SOC 1, SOC 2, or facing audits for the Bank Secrecy Act (BSA) or Anti-Money Laundering (AML) legislation – it’s easy to get lost in the endless alphabet soup of regulatory demands.
At the heart of these compliance audits are risk assessments – formal, detailed proof that your organization is considering threats and committed to implementing controls to mitigate the most serious risks.
Partnering with FIs is crucial to bringing your technology to a larger audience. But financial partners will only trust you with their charter if you’ve shown your risk controls are up-to-par. In many cases, this is easier said than done.
Fintech risk management teams face a number of challenges, including:
- Lack of Guidance: There isn’t a lot of reliable guidance out there for Fintechs. As a result, it can be difficult to know what’s required in a due diligence package for a bank or financial partner.
- Executive Pressure: Especially in the wake of events like the Synapse collapse, your executive board might turn up the scrutiny on your risk management efforts.
- Limited Experience & Headcount: Fintech risk management and BSA/AML expertise are often hard to come by. It’s a burgeoning field, and the battle for top-tier talent is often fierce.
How to Build a Risk-Aware Culture
1. Prioritize employee training
What’s the most important ingredient in a sound risk management strategy? Typically, it’s your employees. Risk management teams are responsible for driving a culture that naturally helps their staff avoid risk and stay compliant on a daily basis. The Fintech world often falls victim to a lack of formalized procedures and training. Ensuring your employees understand risk management best practices can be a major competitive advantage. Focus on building a culture that prioritizes consistent training on cybersecurity, phishing attacks, business email compromise, data privacy, and so on.
2. Emphasize change management
The regulatory and compliance landscape is constantly shifting. That means adaptability and clear communication are crucial to staying ahead of the game. If there’s a regular regulatory change, how is that being addressed? Are the policies quickly updated and then given to the Executive Committee for review? Is everyone else in the organization aware? Should training materials be updated to reflect the changes? These are the questions you need to answer to develop a risk-aware culture at your Fintech.
3. Keep policies and procedures up to date
Educating yourself and your team on the latest policies, procedures, regulatory mandates and compliance initiatives will leave you in a much better position as you put together your risk assessments. Risk management is a collaborative effort, and engaging with both internal and external partners including other departments within your organization, risk management professionals, and even regulatory agencies—can be extremely beneficial. These stakeholders can provide valuable insights, feedback, and guidance on best practices, ensuring that the controls and frameworks you develop are robust and effective.
By involving these partners proactively, you can also stay aligned with regulatory requirements and industry standards, helping you identify and mitigate potential risks more effectively. This collaboration helps to build a comprehensive, well-rounded risk management strategy that takes multiple perspectives into account.
From Risk to Reward: A Due Diligence Playbook for Fintech Trust 
4. Periodically update your risk assessments
This tip may seem fairly obvious, but it’s crucial to staying due diligence-ready for potential banking partners. Work with your team to build a schedule for continuous updates to your risk assessments, as needed. You’ll be better equipped to showcase the quality of your risk management program if you’re not scrambling.
5. Double-check inventories of third-party applications and vendors
As we mentioned in the previous section, it’s important to create a comprehensive list of third-party vendors in a central location. Set up a recurring time on your calendar to update this list, as well as the accompanying onboarding documentation for each third party. Simply knowing who all of your vendors are will give you a leg up. From there, your team can conduct more comprehensive monitoring of SOC reports and other vital documentation.
6. Upgrade cybersecurity practices per the latest guidance
Hackers and threat actors are constantly finding new ways to attack critical systems. That means that cybersecurity regulations and best practices are continuously evolving, as well. For example: organizations such as the Federal Financial Institutions Examination Council (FFIEC) now require multi-factor authentication for any applications that handle sensitive data. Put yourself in the shoes of your potential FI and banking partners. Ensure that you’ve shown you have the controls in place to mitigate and handle threats as they arise.
7. Build plans to address areas with inadequate controls
It’s possible you’ve run a risk assessment and identified a high-risk area with a lack of strong controls. That doesn’t mean you’re doomed. In fact, it’s a great opportunity to improve. Create a concrete action plan to address these areas. Bring in colleagues across functions — cybersecurity, IT, even executives – to ensure you have the necessary resources to execute that plan. Risk management is constantly evolving, and your ability to adapt is crucial to sustained success.