Why risk management is a fintech’s best friend

Fintechs need innovation, new ideas and maximum recurring revenue growth on invested dollars. They therefore attract entrepreneurs, free thinkers and people of ideas. Their vision must be on results and success. These are the keys to a fintech’s success. But one thing is missing – risk management.

‘No’, I hear you say, ‘but risk management is slowing us down. Risk managers are the funny police, the business prevention unit, the stoppers!’ If that’s your view, read on, because I love risk and I love risk management, and yet I like to think I’m none of the above.

A number of years ago I started hang gliding. Why? Because I love the reward of taking a physical risk – adrenaline, not to mention the silence of floating around at 10,000 feet. Hang gliding is an inherently very risky sport: the rewards are great, but the inherent risk is very high. I wanted to take those risks for the rewards, but I didn’t want to die doing it. Enter risk management and controls. I created a 44-point checklist that contained 44 key checks. I did my risk management and control management before every single flight which took me about 20 minutes. During this time, many of my fellow pilots were already flying – they didn’t have time for this risk management stuff. Unfortunately, some of these people are no longer with us, but I’m still here!

The pursuit of rewards and results is wonderful, as long as it is sustainable. The pursuit of reward without risk management is “boom/bust”. Our goal should be a sustainable reward. We have to take risks in fintech – that’s where rewards and success come from – but we also want to be around in 10, 20 and 30 years.

Risk management and reward management should be best friends, not enemies. They are not mutually exclusive and should be considered equal from day one of fintech. Perhaps if the voices of risk and reward were equally listened to, and invested in, by Silicon Valley Bank, they might still be there.

So how do you ensure that risk management is an enabler of sustainable reward and invested in from day one? Ask five simple questions and see where your answers stand.

I may be called a ‘risk manager’ but I see myself as a ‘risk/reward manager’. You should not manage reward separately from risk or risk separately from reward – they are partners. Sometimes I feel that a good risk manager is a marriage counselor, where the partners are risk and reward. A sustainable marriage requires equal input from both parties and that both are listened to equally.

Do you balance your votes between risk and reward, or do you favor reward over risk? If you want long-term success and financial sustainability for fintech:

• Make sure risk management is discussed and addressed on day 1 – it’s not something to put off until another day.
• Ensure that risk management is discussed and prioritized as much as reward management.
• Create a tone from the top and culture that risk management matters.
• Promote the message that good risk management and good control management will enable us to go higher, faster – safely and sustainably.

About David Tattam

David Tattam is Chief Research & Content Officer and co-founder of Protecht Group. David’s vision is to redefine the way the world thinks about risk. Prior to Protecht, David was Chief Risk Officer and Head of Operations for the Australian operations of two global banks.

About Protecht

For over 20 years, Protecht has redefined the way people think about risk management with the most complete, cutting-edge and cost-effective SaaS solutions. We help companies increase performance and achieve strategic goals through better understanding, monitoring and management of risk, resilience and regulatory compliance.

To find out more about effectively managing risk and reward in your organization, visit us at www.protechtgroup.com or email us at [email protected]