THE ROLE AND IMPORTANCE OF RISK MANAGEMENT IN INTERNET BANKING

Abstract

Continuing technology developments and innovations are having significant impact on the way banks interact with their customers, suppliers and counterparties, and how they undertake their operations. Banks face the challenge of adapting, innovating and responding to the opportunities posed by computer systems, telecommunications, networks and other technology-related solutions to drive their businesses in an increasingly competitive domestic and global market. The internet in particular offers major opportunities for banks to reach new markets and expand the range of products and services they provide to customers. The very accessibility and dynamism of the internet brings both benefits and risks. The board of directors and management of a bank are responsible for managing its risks, including technology risks which are becoming more complex, dynamic and pervasive. The risk management process requires the board and management to review and appraise the cost-benefit issues on what and how much to invest in controls and security measures relating to computer systems, networks, data centers, operations and backup facilities. As a general principle, a risk management framework would require the following actions to be taken: - Identify, classify and assess risks that are relevant to the bank's operations and systems. - Develop a documented plan containing policies, practices and procedures that address and control these risks. - Implement and regularly test the plan. - Monitor risks and the effectiveness of the plan on an ongoing basis. - Update the plan periodically to take account of changes in technology, legal requirements and business environment including external and internal threats and security vulnerabilities. The aim of this set of guidelines is to require banks to adopt risk management principles and security practices which will assist them in: - Establishing a sound and robust technology risk management framework. Strengthening system security, reliability, availability and recoverability. - Deploying strong cryptography and authentication mechanisms to protect customer data and transactions. - All banks providing internet banking must erect a sound and robust risk management process that will enable them to identify, assess, measure and respond to technology risks in a proactive and effective manner. - The writer of this article is trying to look attentively and clarified the dimensions of selected subject by use of ˝descriptive - analytic˝ research method.