How the resurgence of risk could help unlock innovation 🫨
How the resurgence of risk could help unlock innovation 🫨
Are we seeing a major shake-up in how financial firms approach risk?
Welcome to The Navigator 🧭 - a newsletter about people, technology and design for business leaders who want to make meaningful change. I’m Sarah Ronald, and I write this newsletter with the Nile team. If this email was forwarded to you, you can subscribe here to receive it straight to your inbox.
Hello! 👋
Lloyds Banking Group recently hit the headlines with a strategic reshaping of its risk management function. In this edition of The Navigator, we reflect on what this means for design teams and changemakers, and whether what we’re seeing might be part of a broader trend.
Stick to the end for our round-up of happenings at Nile, including Global Accessibility Awareness Day, insights on how to balance cost optimisation with customer experience, and applying AI creatively within your business.
Wishing you all the best as you navigate your week.
– Sarah
The resurgence of risk
Why we may be seeing a change in how financial sector businesses approach risk
Is one of the UK’s biggest banks really trying to enable innovation by slashing its risk management function?
Risk managers identify, assess and control threats to an organisation's capital, earnings and operations. According to press reports, an internal review at Lloyds Banking Group found that its risk function had become a “blocker to their strategic transformation”.
“We know people are frustrated by time-consuming processes and ingrained ways of working that impede our ability to be competitive and leave us lagging behind our peers,” it continued, citing two thirds of executives at the firm believing risk stood in the way of progress. Fewer than half of senior staff thought “intelligent risk-taking” was being encouraged.
The outcome: around 175 of LBG’s risk management roles are now on the line, which the BTU union said was like “throwing the baby out with the bathwater” – although there were also reported plans to create new roles focusing on specialist risk and technical expertise.
More is going on here
This news sparked a great deal of discussion, at least in our ecosystem.
For design practitioners in particular, it could be easy to fall into a perception trap here. Risk teams can sometimes seem difficult to work with, and headlines like these can add fuel to that perception. The logical solution to this view would be simply to cut back risk teams and open the doors to progress.
Having worked with many risk teams who absolutely weren’t out to block innovation, we were curious to find out whether there was a different narrative here. So we spoke with a senior risk expert at another global financial firm – one you’ve definitely heard of – who provided another perspective.
We think the reality is more nuanced – and more interesting. Could we be seeing a strategic evolution – the reinvention and resurgence of risk?
Risk teams were never out to crush your spirits
Let’s first eliminate the notion that risk professionals spring out of bed each morning, filled with the desire to crush designers’ dreams. They aren’t motivated by blocking innovation; they are, after all, at the core of the business, and heavily invested in its success. If anything, they have a more complete picture of the landscape, and the different pressures the organisation is under, than those at the sharp end of designing products and services.
After the financial crisis in 2008, firms focused on getting regulation right. That meant financial firms stood up risk teams with a very broad remit, aiming to ensure their business met all its duties in the face of extreme regulatory pressure.
Under these risk generalists, projects were delivered beneath layers of risk checks required to avoid immediate problems, like attracting massive fines, and avoiding bad press or even criminal prosecution. This could be frustrating and onerous for those further down the line, with risk seeming to stymie innovation for designers, sometimes resulting in a lacklustre customer experience.
Of course, those working in risk roles were simply doing what they had to do to ensure the business remained compliant and out of trouble – a thankless task.
Resetting risk
LBG have said they’re “resetting their approach to risk and controls”, which hints at the nuance behind the headlines. The real shift is not towards a free-for-all in which risk barriers are removed. Instead, it’s a realignment from teams of generalists to risk specialists – individuals who can own niches and act as better partners to the business and enable innovation.
Another change in the risk landscape pertinent to financial firms is, of course, the FCA Consumer Duty. Customer experience is now itself a factor which risk professionals must consider, so CX will now be front and centre when considering the impact of new approaches. We have many teams working on this topic right now.
As risk teams become more specialised and people-focused, they will be better positioned to work directly with designers, including product and service designers. Risk specialists who deeply understand specific risk domains can provide targeted guidance to design teams, helping them create innovative solutions that still adhere to necessary regulations.
This collaborative approach, with risk as a partner and enabler rather than appearing to be a blocker, will lead to better outcomes for colleagues and customers alike.
Resurgent risk
So the shift we're seeing isn’t a diminishment of risk management, but its evolution towards more strategic, specialised in-house roles, focused on areas like anti-financial crime, supply chain resilience and cryptocurrencies. The difference these specialist functions will make will be seismic, effecting change across processes, products and services.
The future of risk is not about blocking progress and change – it never was. Resurgent risk teams will be able to catalyse decision-making and help deliver transformation programmes more quickly. They’ll be working alongside design teams to enable more intelligent, customer-focused innovation, while still balancing external pressures such as the demands of regulators. For customers, that will mean products, services and experiences that consistently move with the times.
Lloyds may have made the headlines with their decision, but it’s a strategic one which won’t have been taken lightly. Our best guess is that risk functions across the board will follow a similar pattern, shifting from cautious generalists into lither, more specialised business units. We think LBG is the first, but it’s likely the first of many.
Nile News
Global Accessibility Awareness Day
Did you know it’s nearly time for Global Accessibility Awareness Day?
GAAD takes place on Thursday 16th May. The idea is to get people talking, thinking and learning about digital access and inclusion.
We’re looking forward to playing our part by delivering some fantastic live installations and demonstrations of accessibility software and inclusion practices for some of our clients.
Part of our business - Dig Inclusion - focuses on helping organisations get accessibility and inclusion right. We regularly share insights on Dig Inclusion’s LinkedIn page - give us a follow if you haven’t already.
If you’d like a session or support on the day, feel free to reach out to me directly.
Reducing costs without harming customer experience
Cost reduction and customer experience don't have to be at odds with each other.
At our most recent Changemakers' Breakfast in Edinburgh, our guests - professionals invited from a spectrum of roles and sectors - had a thought-provoking discussion on how to make better choices about optimising costs without impacting CX.
Some of the key points that came out of the discussion included:
Cutting costs without thinking things through can damage customer relations. For example, going paperless without considering the impact on customers who rely on physical documents.
Simply trying to emulate the outcomes achieved by your leaner competitors will fall short if you fail to understand the strategy behind their decisions.
Multiple minor cost savings can accumuluate and degrade overall customer experience - 'death by a thousand cuts'.
Quarterly reporting pressures can drive short-term thinking that makes it hard to properly evaluate the impact of measures to improve customer experience.
Front-line teams see inefficiencies every day. Empowring them to identify opportunities for cutting wasteful processes can lead to significant savings.
Partnerships can reduce costs, but they have to be more than supplier/customer relationships - true partnership needs purpose, aligned incentives and strong governance.
In times of change, organisational memory can often be lacking - but it's critical to avoid repeating past mistakes. AI may help bridge the tacit knowledge gap.
The overarching theme was that, when cost reduction is necessary, it has to be balanced with customer experience and genuine long-term thinking.
Creative uses of AI in business
We also recently hosted the third in our ‘No Harm Done?’ series of events on AI, design and ethics at our Circus Lane HQ, in collaboration with the University of Edinburgh and Edinburgh Futures Institute.
We shared four amazing case studies from Ana Betancourt of Black Goblin, Adam Turner from The Data Lab, Javier Tejera from the University of Edinburgh and our very own Lloyd Vaughan.
In an intimate "conversation station" format, our presenters shared their successes and challenges with building ethical and effective AI-centred organisations.
Our Design Director, Neil Collman, co-hosted the evening and compiled the following key insights uncovered by the participants:
🗣️ Learn how to explain AI to humans
In medical applications, making complex AI functionalities understandable to patients, especially when it comes to life-changing applications such as cancer diagnosis, is critical for adoption. And as AI regulation starts to kick in, explaining what AI is doing to patients/users/customers — and why they can trust it — will be a fundamental skill in successful business.
🛤️ Be prepared for mis-steps in finding the right AI use cases in your org
Many businesses struggle to identify the best starting points for integrating AI, but you have to start somewhere. Adopting a learning mindset and being prepared to iterate and adapt is key. A nice little insight for building successful process optimisation prompts was to explicitly tell AI to return "nothing actionable found" rather than generating ‘hallucinations’ (i.e. making things up).
🧩 Actively build diversity in your AI training data
It was encouraging to hear about increasing efforts to build diversity and awareness of source data ownership into the training data for AI models in a variety of applications, especially in the creative sector.
🔍 Complement AI personas with real research
We also explored the use of AI personas to derive insights. It's not difficult to imagine that over time, the quality of this kind of toolset will improve drastically as we learn what is useful, ethical and beneficial. But how dangerous is it to be missing out humans in research — especially in high stakes applications – and where should the line be drawn?
Would you like to attend a future event in the series? Register your interest and you’ll be the first to hear what’s happening.
That’s all for this issue - if you find The Navigator valuable, please spread the word by sharing it with your friends and colleagues:
About Nile
Nile is a Strategic Design company that delivers human-centred change in highly regulated industries. Our methods embed new technologies and ways of working with colleagues and customers. Our outcomes save time and money without compromising experience.
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