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June 2021 (published: 19.05.2021)
Number 2(45)
Home > Issue > Technological risk analysis of financial innovations
Sergeeva I.G., Ali H.M.
The growing competition in the global financial markets requires significant changes in the activities of traditional financial intermediaries in order for them to remain competitive. The introduction of technological innovations in the financial sector creates for market participants both huge operational opportunities and economic benefits, as well as new types of risks. The main types of risks associated with the introduction of digital technologies in financial activities are considered, in particular, technological risks associated with cybersecurity and the use of the big data system. The purpose of the study is to identify technological risks and review risk management mechanisms. One of the consequences of using technological innovations is not only a reduction in operating costs and an increase in the level of service for consumers, but also a partial or complete rejection of some types of intermediary financial services. The growing dependence of the financial sector on the increasingly active use of information technology leads to the emergence of new sources of systemic risks, especially those associated with the implementation of cyberattacks. In connection with the digitalization of business processes, risks are moving faster and faster through the financial system. In order to increase the level of security of transactions carried out in the financial market, various risk management mechanisms are used; some financial institutions create their own operational security centers. One of the consequences of the spread of technological innovation is the process of decentralization of financial services, which includes decision-making, risk-taking, and accounting. The formation of decentralized network finance requires more attention to the creation of a risk management system to improve the security of market participants.
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Keywords: Financial innovation, technological risks, FinTech, digitization, risks, cybersecurity, consumer’s protection, financial systems, decentralization.
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
UDC 336.7
Technological risk analysis of financial innovations
The growing competition in the global financial markets requires significant changes in the activities of traditional financial intermediaries in order for them to remain competitive. The introduction of technological innovations in the financial sector creates for market participants both huge operational opportunities and economic benefits, as well as new types of risks. The main types of risks associated with the introduction of digital technologies in financial activities are considered, in particular, technological risks associated with cybersecurity and the use of the big data system. The purpose of the study is to identify technological risks and review risk management mechanisms. One of the consequences of using technological innovations is not only a reduction in operating costs and an increase in the level of service for consumers, but also a partial or complete rejection of some types of intermediary financial services. The growing dependence of the financial sector on the increasingly active use of information technology leads to the emergence of new sources of systemic risks, especially those associated with the implementation of cyberattacks. In connection with the digitalization of business processes, risks are moving faster and faster through the financial system. In order to increase the level of security of transactions carried out in the financial market, various risk management mechanisms are used; some financial institutions create their own operational security centers. One of the consequences of the spread of technological innovation is the process of decentralization of financial services, which includes decision-making, risk-taking, and accounting. The formation of decentralized network finance requires more attention to the creation of a risk management system to improve the security of market participants.
Read the full article
Keywords: Financial innovation, technological risks, FinTech, digitization, risks, cybersecurity, consumer’s protection, financial systems, decentralization.
DOI 10.17586/2310-1172-2021-14-2-23-29