Financial sector must embrace "trust architecture" – CEO

Building trust into processes should be a priority for financial institutions working to comply with the updated Financial Accountability Regime, says BizCubed boss Zachary Zeus

Financial sector must embrace "trust architecture" – CEO

The updated Financial Accountability Regime (FAR), recently passed in the Australian Parliament, imposes stricter accountability obligations on superannuation funds, banks, and insurers.

To comply with FAR, financial institutions need to align with a strengthened framework from the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission. Banks are required to align with this framework by March 2024, while other financial institution types have an additional year to comply.

In response to FAR, BizCubed CEO Zachary Zeus (pictured above) has presented a data-based framework he calls “trust architecture“ to help financial institutions satisfy the new requirements.

“Trust is easier to destroy than it is to build, but it can be built,“ Zeus said. “Similar to the concept of security architecture, trust is something that has strategic, operational, and technical dimensions. It can, and must, be architected and this should be a priority for every financial institution working to comply with FAR.“

Zeus, a qualified expert contributor to the United Nations Centre for Trade Facilitation and Digital Business (UN/CEFACT), has worked on various digital trust projects. He said that trust architecture should be a priority for every financial institution working to comply with FAR.

Trust architecture and data ecosystems

Zeus urges financial institutions to architect their data processes and business outcomes to reinforce the trust proposition.

“Every customer interaction needs to reinforce the trust proposition in order for financial services firms to maintain their social licence to operate,“ Zeus said. “That requires a data ecosystem that forms a bedrock for trust.“

Zeus said the data ecosystem of financial institutions was the digital twin or digital representation of the business. Therefore, he recommended intentionally architecting data ecosystems for trust to avoid data management issues that can undermine trust, impact customer experience, and perpetuate vulnerabilities in the network.

Shifting ownership and leveraging open standards

Zeus suggested a mind shift from centralised IT to business outcomes. He said that business teams should take ownership of their data outcomes, just as they are held accountable for their profit and loss (P&L) statements. While the finance team may handle the work associated with the P&L, business team leaders are ultimately responsible for their unit's financial performance. Similarly, business teams should take ownership of their unit's digital twin and leverage effective data management to support innovation, improve adaptability, and drive growth, he said.

Zeus also highlighted the importance of architecting data ecosystems that leverage open standards. He said that governments, regulators, and consumers are increasingly demanding verifiable information about traded goods and services. Open protocols, such as the UN Traceability Protocol, can enable financial institutions to outcompete by designing trust into their data ecosystems.

“After all, business teams are the ones that own the day-to-day transactions and every customer touchpoint throughout the customer lifecycle,” he said. “They should have ownership of their data processes and outcomes within an appropriately controlled and compliant organisation.”

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This becomes particularly relevant in areas like environmental, social, and governance (ESG), where the ability to verify carbon neutrality can be a competitive differentiator, Zeus said.

Operational excellence and risk management

To operationalise trust architecture, financial institutions need to address, fix, document, and control data processes at the business team level, Zeus said. This ensures consistency, compliance, security, and personal information protection. Additionally, overarching monitoring, auditing, and whole-of-business risk management controls should be built-in at an organisational level to provide oversight and automate compliance in the changing regulatory environment. The objective is to make it easier to do the right thing than the wrong thing, which Zeus defined as “operational excellence.“

By adopting this cohesive, layered approach, financial institutions can enable data workflows, innovation, hyper-personalization, and gain a competitive edge through data-driven operations, Zeus said. Simultaneously, they can ensure the level of risk management and control necessary to rebuild trust in the wake of FAR.

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