Financial Times Europe - 23.03.2020

Monday23 March 2020 ★ FINANCIAL TIMES 3

Risk ManagementFinancial Institutions

W

hen Barclays installed

newsoftware to moni-

tor employees’compu-

ter use earlier this year,

i t w a s h o p i n g f o r

insights intotheir behaviour. Weeks

later, the bankscaled back use of the

system as staff annoyance over moni-

toringspilled into the press, and was

then amplified further in publicby

social media.

Like other banks, insurers and asset

managers, Barclays is having to adapt as

social media plays a bigger role in creat-

ing, and shaping,its public image.

“Control of reputation has been

dragged out of the boardroom and

press releases, and into the pockets of

the smartphone generation,” says

George Beattie, a director at insurance

broker Willis Towers Watson. “It is a

very volatile situation.”

Companies in all sectors face similar

concerns, but Sven Klingemann of the

Reputation Institute, which assesses cor-

porate reputations, says the banks are

starting from a challenging position.

“Banking has historically been at the

lower end of the 12 to 15 industries we

cover,” says Mr Klingemann. “The large

banks struggle most with reputation,

while the smaller regional or online

banks tend to do better.”

Threats from social media come in

several forms. ne is internal — as Bar-O

clays discovered, employee dissatisfac-

tion with a new system or policy can eas-

ily leak into the public sphere.

Improper behaviour that spills out

into the open is a similar risk. “The big-

gest risk for the banking industry is

unethical behaviour,” says Mr Klinge-

mann. “[This can include] deceptive

sales practices and inappropriate

behaviour such as harassment, bullying

or discrimination. And if you fire or

punish whistleblowers, it’s not going to

look good.”

Even banks’ own social media and

marketing teams can get it wrong if

they misread the public mood. Chase

Bank in the US discovered this to its cost

last April. Its Twitter team used the

#MondayMotivation hashtag on a tweet

that suggested people should eat out less

and walk rather than taking cabs.

The reaction was swift and wide-

spread. Chase was accused of shaming

poor people and insulting its customers,

with politicians, including former presi-

dential candidate Elizabeth Warren,

weighing in against the bank and Jamie

Dimon, chief executive of its parent

company JPMorgan Chase.

Chase ended the day with a tweet:

“Our #MondayMotivation is to get better

at #MondayMotivation tweets. Thanks

for the feedback Twitter world.”

TD Bank aced a similar storm lastf

year when social media users accused it

of coded racism in an advert referring to

an ethnically diverse Boston neighbour-

hood. The bank laterapologised.

Mr Beattie says banks must be mind-

ful of these pitfallswhen planning cam-

paigns or posts. “Companies are not

ready to deal with crises fuelled by

social media,” he says. “A poorly

thought-through social media campaign

can be more damaging than not doing

anything at all. Testing an idea in social

media in real time can be quite risky.

You need to look at what demographic

you are targeting and what virality

might look like,” he adds.

Not all social media crises are inter-

nally generated. Financial services

companies face an array of outside

voices that could have a reason to

attack their reputation.

“There is state-driven manipulation

of social media to undermine economic

strength. The idea of sowing dissent in

democracies and their brands might be

quite attractive,” says Mr Beattie.

Even pressure groups of more

straightforward kinds can exploit social

media to build support, and financial

services companies need to be ready to

respond appropriately.

Campaigns on climate change are one

example. Banks, insurers and asset

managers are under pressure from

action groups to dissociate themselves

from companies accused of responsibil-

ity for global warming, by refusing to

lend to them, insure them or invest in

them. Groups such as Unfriend Coal,

which campaigns to end insurance

industry involvement in coal mining,

are enthusiastic users of social media.

Yasmin Crowther, a vice-president at

Polecat, which analyses social media

data, says financial services companies

have lagged behind consumer brands

such as Nike and Nestlé.

“[Consumer] organisations are

sophisticated in their understanding of

social media,” she says. Financial serv-

ices companies, however, “have not

been at the cutting edge of understand-

ing it”, she says.

According to Mr Beattie, the first step

for companies is to understand what

information they can access on what is

being said about them, when and

where.

Although this data has only been

around for a couple of years, he adds, it

can generate “astounding insights”.

Banks discover antisocial side of social media

Reputation

Financial services

groups were slow to

adapt to online public

image challenges,

writesOliver Ralph

Misjudged: Chase Bank’s tweet

as the falling costs of launching large-

scale cyber attacks, the report noted.

Financial services businesses’ vul-

nerability to cyber attacks as beenh

illustrated by a string of high-profile

incidents,including a recent breach

that temporarily paralysed UK-based

payments groupTravelex. Hackers

threatened to sell customer data unless

a ransom was paid (see story, page 4).

Peter Kennedy, head of UK technol-

ogy at consultancy Capco, says cyber

security is the “first question that comes

up” when clients contemplate introduc-

ing new technology, while Mr Ghose

adds that among banks’ most senior

executives “cyber is top of mind in a way

it probably wasn’t 10 years ago”.

The worstcyber attack for banksis

one that compromises customer data,

says Heedon Kang,co-author of the

IMF’s February’s report on cyber risk.

Such breaches “create an erosion of con-

fidence”, he says.

In the aftermath of December’s attack,

Travelex stressed that customer data

was not compromised. US bank Capital

One was less fortunate last year when an

attack ompromised more than 100mc

customers’ data. The alleged perpetra-

tor, a former Amazon Web Services

employee who is accused of accessing

data held on Capital One’s cloud comput-

ing server, will face trial in October.She

pleaded not guilty last September.

Banks’ rapid adoption of cloud com-

puting — switching data and computing

power to servers managed by big tech-

nology companies rather than keeping it

in house — has been a mixed blessing.

Cases such Capital One show how the

cloud introduces potential gateways to

banks’ data. Regulators at the Financial

Stability Board voicedconcerns bouta

the concentration risks associated with

having data for hundreds of financial

service institutions mostly spread

across the three biggest cloud providers,

Microsoft, Amazon and Google.

Others say cloud computing improves

resilience. “We believe that moving part

Continuedfrompage 1

of the activity to the cloud is actually

positive in terms of cyber protection

because usually the capability of the

cloud providers [is better],” says Ales-

sandro Roccati, a senior vice-president

at Moody’s, the rating agency. “[They

can] block attacks more effectively

because they can adapt to the changing

nature of cyber attacks quicker.”

Hacks of data servers have a big

impact on banks and customers but

hacks of individuals’ digital accounts are

far more common. Banks are often not

legally liable if a customer reveals their

passwords and their accounts are

drained, but sometimes offer compensa-

tion to avoid losing customers’ goodwill.

“[Customers] still need a lot of finan-

cial literacy education,” says Mr Ghose.

“It’s not just about old people versus

young people... People just give away

their credentials, they get a phone call

saying you won a prize, there’s a problem

with your ID, you’re in trouble. They

play with your emotions and it’s amazing

how many people [fall for it].”

Banks are using technology to reduce

this risk, by creating more sophisticated

authentication features including facial

and voice recognition, geolocation, and

tools that evaluate how a phone is held

and how keys are pressed.

They also use technology to curb risks

in other parts of their business, including

artificial intelligence tools that monitor

traders’ behaviour (to counter the risk of

rogue trading) and big data techniques

used in underwriting loans.

“We’re seeing our clients take a more

aggressive approach to define their

threats and make sure [they] are miti-

gated by some of the latest and greatest

tools,” says Mr Kennedy of Capco.

Mr Ghose says these efforts to deploy

technology to limit risk could become a

differentiating challenge faced by igb

banks and smaller banks. “Big banks

have bigger tech budgets, if you need to

spend half a billion dollars on

cyber... go and hire government

experts, ex-FBI experts, that’s much

harder [for a smaller bank].”

New tech

broadens

scope for

cyber attacks

Chase Bank in the US was

accused of shaming poor

people and insulting its

customers in a tweet

Contributors

Robert Armstrong

US finance editor

George Hammond

Property reporter

Billy Nauman

Producer/reporter, Moral Money

Laura Noonan

US banking editor

Oliver Ralph

Insurance correspondent

Jerry Andrews

Commissioning editor

Steven Bird

Designer

Esan Swan

Picture editor

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produced by the FT.

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prior sight of the articles.

001 m+

Capital One

customers’ data

was compromised

in a cyber attack

3

largest cloud

providers host

most financial

services data

O

n the southern edge of

Derby, a new manufactur-

ing and innovation district

called Infinity Park is

springing up. The most

striking building isthe iHub, a sleek

innovation centre that opened in 2017.

The curved glass walls and shared

atrium events space emphasise its aim

to promote collaboration among its ten-

ants. The £12m, 45,000 sq ft building

hosts research and technology firms

searching for the next breakthrough in

the aerospace, automotive and rail sec-

tors.

Derby council and central govern-

ment paid for the building to encourage

growth in start ups. Its location in an

Enterprise Zone brings tax breaks, and

free superfast broadband.

Tenants include VRCO, designing a

flying passenger vehicle, Airbus, the

aerospace company, and law firms that

advise industrial companies. It is almost

fully occupied.

It also contains an ‘iLab’ equipped

with 3D printers and software to enable

the rapid prototyping of new products

and services.

Steve Barbour, managing director of

Composite Braiding, which has devel-

oped a lighter, stronger form of compos-

ite material for industry, said: “The

iHubprovides a combination of modern

workshop and office space, ideal for a

manufacturing start-up, with flexible

terms. It is also close to our transporta-

tion and infrastructure target markets.

“The iHub also impresses potential

customers — first impressions do

count.”

MARCH 23 2020 Section:Reports Time: 19/3/2020- 17:15 User:jerry.andrews Page Name:RMX3, Part,Page,Edition:RMX, 3, 1