Data Management In The Fight Against Sustainability & Digital Transformation Challenges For The Financial Sector

Andy Ng | 9 September 2022

Andy Ng, Vice-President and Managing Director for Asia South and Pacific Region, Veritas Technologies.

The banking and financial services industry has undergone significant transformation in recent years, especially with accelerated digitalisation driven by the adoption of new technologies. The global pandemic has further presented new challenges for financial institutions, as cyber criminals seek to cash in amid the chaos. As consumers embrace online and mobile banking services for ease and convenience, financial institutions are also under pressure to strengthen their resilience against cyber threats and scams, while balancing the need to pursue digital transformation, and the constant battle to ensure compliance with an ever-growing labyrinth of regulatory commitments.

Financial Sector And The Sustainability Connection

The latest call for the financial industry to deliver on sustainability initiatives comes at a time where financial institutions are caught in a rat race to keep up with the ever-evolving digital banking landscape while ensuring their cyber defences are up to scratch.

Sustainability is no longer a buzzword. It has become the new strategic imperative. There is an increasing need for financial institutions to demonstrate that they can meet the stringent standards related to climate risk reporting. Additionally, there is a growing demand for a strong commitment towards environmental, social and governance (ESG) efforts from key stakeholders including customers, regulators and investors alike.

At the forefront is the commitment to net zero emission, which refer to the efforts of eliminating all man-made greenhouse gases from the Earth’s atmosphere, to reduce its net climate balance. The industry-led, UN-convened Net-Zero Banking Alliance is playing a key role in bringing together banks worldwide that are committed to net-zero emissions by 2050. Banks adopting these frameworks and science-based guidelines are primarily aiming to curb carbon emissions from their operations and aligning their lending and investment portfolios with net-zero emissions goal.

Regulatory momentum gaining across Asia Pacific 

Climate change is already a reality. Today, central banks and financial regulators are starting to factor in climate change as a systematic risk for a good reason. 

Climate change primarily affects the financial system through two main ways, with varying levels of the risk exposure across countries. The first involves physical risk arising from damage to property, infrastructure, and land, with changing weather patterns and natural disasters increasing in frequency and intensity. The second relates to transition risk resulting from the process of adjustment to an environmentally sustainable economy, including changes in public policies, technology and shifts in consumer and investor preferences.

It is encouraging to see several central banks taking steps in the right direction to mitigate the impact of climate change. In Asia, Singapore and Hong Kong have taken proactive measures to strengthen their sustainable finance regulations. 

Singapore

Effective from June 2022, all banks, insurers and asset managers in Singapore will have an additional set of compliance regulations to address, with the Monetary Authority of Singapore mandating climate-related financial disclosures in line with well-regarded international reporting frameworks.

Aligned with the G20 taskforce recommendations, the new mandatory disclosure requirements include revealing the impact of climate-related issues on an organisation’s businesses, strategy, and financial planning across a broad range of areas, spanning from products and services, supply chains, investment in R&D, operations to acquisitions or divestments. 

In December 2021, the Singapore Exchange announced climate disclosure rules whereby all companies must provide these disclosures on a ‘comply or explain’ basis in their sustainability reports for financial years (FY) starting on or after 1 January 2022.  The disclosures will be mandatory from FY 2023 for companies in the financial, agriculture, food and forest products, and energy industries. 

Hong Kong

In November 2021, with an aim to help companies assess and disclose their response to risks arising from climate change, the Hong Kong Exchanges and Clearing Limited (HKEX) published guidance to listed issuers on climate disclosures.

The Hong Kong Monetary Authority has also recently released the supervisory policy manual for climate risk management –  to provide guidance on the key requirements with regard to financial institutions’ governance, strategy, risk management and disclosure in building climate resilience.

Leveraging digital transformation in the right way

The introduction of all these requirements adds to the growing number of regulations that financial institutions must comply with. However, compliance can significantly strain resources and is often dependent on the ability to correlate, analyse, and manage data from disparate sources.

At the same time, banks must ensure that security remains a top priority, and invest in the latest technology-driven data security measures to safeguard sensitive and confidential data. Cyberattacks also expose banks to stringent financial penalties resulting from security lapses, with regulators imposing additional capital requirement to ensure banks are adequately prepared to manage scams or cyber breaches involving their consumers. 

Digital transformation initiatives including the adoption of cloud computing are important steps to ensure financial institutions have the right data architecture in place. However, for some financial institutions, the digital transformation journey might be fraught with challenges due to diverse IT infrastructure in the wake of acquisitions and mergers, data management complexities arising from the mix of legacy and cloud infrastructure and the lack of skilled IT staff.

This is a bridge which financial institutions must cross. As financial institutions embark on their digital transformation initiatives, it is critical to ensure their data are seamlessly managed and protected in parallel or risk exposing themselves to data breaches and non-compliance. 

Efficient data management will be key

As businesses push for digitalisation, it is critical for financial institutions to adopt a proactive stance against cyber exploits by leveraging the appropriate autonomous data management solution that harnesses artificial intelligence and hyper-automation to self-provision, self-optimise and self-heal in multi-cloud environments.

It is common for organisations to end up with a patchwork of piecemeal data protection solutions in the cloud, especially when they are forced to accelerate their digital transformation ahead of schedule. Over time, the workloads and applications that have been deployed in silos will add up, creating cost and management burden. 

Coupled with the availability of cloud storage, it is no surprise that data bloat in the cloud is becoming a big sustainability challenge as companies continue to embrace multi-cloud strategies. To address this, organisations need a long-term solution that can help to reduce the footprint of their cloud backup and automate its management.

Processes such as efficient management of critical applications, data and workload and harnessing efficient backup and storage methods including elastic utilisation of cloud infrastructure and deduplication techniques can result in lower costs and a reduced carbon footprint. Done right, this will enable financial institutions to drive the sustainability agenda.

A sustainable future enabled by intelligent data management strategy

The financial sector plays a key role in unlocking a sustainable future. It can support the transition to a less carbon intensive economy and channel capital to green technologies and infrastructure. 

To stay ahead of the curve, it pays for financial institutions to put priority on intelligent data management to manage their ever-growing data footprint for regulatory compliance while addressing sustainability challenges. 

By adopting a good data management solution that combines automation, artificial intelligence and elastic architecture optimised for the multi-cloud, financial institutions are paving their way to achieve a more cost-effective, secure and sustainable future.