Like all industries, the financial services sector is being transformed by technology—so much so that regulators are striving to catch up to protect the safety and soundness of institutions, not to mention their customers.
CIOs are at the forefront of this delicate balance. How do they successfully accomplish this? Two Ernst & Young experts share their thoughts.
Fred Cibelli (pictured on left) is an EY principal, technology consulting, and Rajiv Ramanathan is EY’s Americas FSO people advisory services principal. Both are based in New York City.
Fred, how has the role of CIO evolved, specific to those in financial services? What should be their priorities?
The role of the CIO at financial services companies is changing drastically. After 10-plus years of consolidating technology, with investment going into “regulatory compliance” in technology, CIOs are now realizing their services and technology are not aligned to the value streams of their companies—making it too hard for the organization to innovate.
Big themes have emerged: a move to “platform”—more common services and reuse of those services across asset classes; ecosystem—moving processes and capabilities to external partners; and developer experience—a real investment in engineers’ productivity and autonomy to create.
Fred, why is the CIO role critical for financial institutions to mitigate the risks that are prevalent today?
Financial institutions are facing risks from embedded finance, GenAI and more competition that requires them to innovate faster. At the same time, the regulatory pressures have only increased the complexity and cost of their technology—sometimes these costs are more than two thirds of their business cost. Without a refocus on engineering productivity, creating space for innovation while still maintaining safety and security is going to be a challenge.
But CIOs are at the critical inflection point between delivering value, changing the ways of working and modernizing their environments in their organizations to help drive this change.
Fred, what strategic elements are becoming part of the CIO role? Which are critical to achieving business transformation?
The CIO has a few strategic elements that are critical for this transition. They are driving the move to value-aligned product organizations and creating a more consolidated and actively managed platform of services. Additionally, they are owning the KPIs around engineering productivity and innovation for the organization.
Rajiv, what are the biggest challenges facing CIOs in financial services today? Opportunities?
Most CIOs face an uphill battle with increased digital adoption, new technologies and cyber threats. The key is to build a resilient technology organization which can support growth in the face of change and adversity.
However, less discussed challenges include working with more tech-savvy CEOs and boards who expect CIOs to be constantly innovating and bring the best technology solutions to enhance customer experience.
It is also crucial to change the mindset that technology is viewed as a cost center as opposed to a value creator. Additionally, CIOs face the challenge of attracting and retaining the best tech talent in competitive marketplace.
While there are challenges CIOs need to overcome, there are also opportunities for growth. By focusing on technology as a value driver, CIOs can help create a culture of innovation that drives the adoption of new technologies like Gen AI, IoT and Metaverse.
CIOs also have the opportunity to build a customer-centric organization that embraces a product-based operating model and use technology to drive the ESG agenda by combining data, applications, industry best practices, standards and framework. Lastly, CIOs can build out a talent pipeline to foster the next generation of leaders.
Rajiv, should the CIO role evolve into a CPO or mini-CEO role? Why or why not?
Most financial services firms are embracing a customer-focused, product-centric operating model, thereby eliminating the silos between business, technology and operations and creating a vertically integrated P&L led by a mini-CEO or a redefined chief product officer. This drive is a result of a customer-centric and tech-savvy board that understands the need for agility, speed and driving change at scale.
To achieve change at scale, the mini-CEO role merges the traditional “why” led by the CPO and “how” led by the CTO into a powerful role that enables the organization to stay customer-focused and integrate technology into the DNA of the organization.
When is the right time to think about elevating the CIO to CPO? Organizations that embrace a digital-first thinking and want the technology teams to understand the customer and the markets, not just focus on delivering the back-end tech, are ready to think about IT as a value driver rather than a cost center focused on staff augmentation and offshoring.
Rajiv, what are some factors CIOs today need to consider as they think about how to implement generative AI?
CIOs must understand the business needs and define the use cases to deliver value at scale and solve real business problems. If the business context is not realized, there is a risk of Gen AI being a “cool” tool that doesn’t deliver value or can’t be scaled. CIOs should ensure that any AI that is used is fair, ethical and protects data privacy.
As the AI landscape evolves, CIOs must develop the right governance framework with phased adoption using humans in the loop and establish the right monitoring mechanisms to monitor the Gen AI outputs. CIOs must ensure there are appropriate data privacy and security measures that govern the intake and use of data to stay compliant with data privacy and security guidelines.
CIOs should also work closely with the HR leaders to develop skills within the tech function, especially software engineers, data engineers, MLOps engineers to embrace new technology, so that the change can be delivered at scale in a sustained manner.
Finally, they must strategically consider building their own models versus partnering or adopting open-source AI models based on business context, use case and value creation.
