What are the best ways to mitigate risk in Fintech?

Many types of risk, competition, technology, macro-economic, etc. I will focus on one, regulation. In the markets I serve, Africa, regulation is a important risk to identify, assess and address. No matter what African country or countries a fintech operates in they must be in compliance with their regulators. These include payment networks, central banks, and the compliance units of their value chain partners - banks and processors. This risk must be managed from market entry and in parallel with the other risks. Early engagement is needed as the relationships with these regulatory and compliance partners can be complex and lengthy. Engage and build these relationships to avoid delays that disappoint customers and investors.

Implementing risk mitigation strategies starts with answering "Which risk, and borne by whom?". These answers dictate the best risk mitigation approaches. Just two examples: (1) when an FI embeds a Fintech into the FI's services (e.g., an FI embeds a Fintech's AML solution into the FI's loan origination), a key risk is the 3rd party risks that the FI bears, or (2) when a Fintech embeds a regulated financial service into its end-customer experience (e.g., a medical practice management vendor permits the practice to open a deposit account), the Fintech must ensure that it is compliant with deposit-account regs (even though the FI holds the ultimate risk). The nature of the risk will determine the best risk mitigation approach.

Take Your Sweet Time Fintech can be a multi-headed beast to deal with...trying to figure out what part of the beast is the issue. The industry has divided itself into companies playing both sides of the fence: new companies not aware of what they are doing, offbeat companies trying to find a home, and those slinging anything that would stick even if it's a horrible situation, products, or services. I would tell you to take your time. I've been with some of the most technically gifted people you have ever met who could not figure out the complexities of an intentionally vague industry. Take your sweet time.

Robust controls combined with multiple red flags must be implemented. This is where technology such as blockchain can play a key role. These controls and red flags must be aligned to regulations in order to deliver compliance. This is also key, as any trigger point can dismantle perceived resiliency quickly and suddenly.

Only Someone Like Me Can Say It Boldly Like This OK, Fintech has an unnatural, often-ignored cultural issue. Some companies were actually helping and are part of the traditional banking system. They're playing both sides. You will not fully understand the culture if you don't understand this and know who they are. The banks owned some Fintech companies that served as roadblockers for the banks. Knowing definitions and phrases like sophistication, ignorant, pioneers, greedy, want to be different, thrown together/away, and any other I can't think of politely. You must understand this needed collage of thrown-together sub-industries, start-ups, rogue companies, and double dippers trying to be a primary industry. There is no one approach.

Shortcoming's Need Addressing Most stakeholders are likely unprepared, lacking written strategies, inadequate resources, and unqualified staff, especially for Fintech. But they dare not say for fear of being removed and replaced. A partner needs to know that a shared weakness doesn't mean they will be replaced but will help them become stronger. Their ability to address the tasks is why they are at the table. In many situations, stakeholders find themselves unprepared to address challenges because they can't fix staff turnover, have a leadership culture problem, cannot write adequate strategies that serve as a roadmap, etc. Nobody can JUST go off meetings; there needs to be written, studied, deligated, and implemented strategies.

Change: Address vs Adjust vs Adapt vs Adopt vs Add Address: bring something or a situation to someone's attention. Management addressed risk worries on policy changes/markets. Adjust: make little changes to get the appropriate outcome. To attract the right people. Adapt: modify so it is appropriate for a purpose. To satisfy consumers preferences. Adopt: take up, begin utilizing, or adhere to a concept or plan of action). Add: to increase by joining or combining to or with something or someone else.

Reward Some Risk From Time to Time A pivotal perspective often overlooked is the dynamic nature of risk management in fintech. It would help if you always learned from and of risk incidents, best practices, and forward-looking and proactive strategies. Encourages a culture of perpetual enhancement, where risk is as much rewarded as maintenance.