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It’s all about mobile RISK!

By 7th September 2015 No Comments
Mobile Risk

Should you really ask your Mobile Network Operator to record your calls? Anyone who has ever worked in the financial services industry will know (amongst other things) that; 1) the entire industry is under the brightest regulatory spotlight in history and 2) everything always comes down to one common denominator; Mobile RISK.

Risk, and the management of risk, is THE primary duty of anyone employed by the industry whatever their role, duty or function. Risk can take many forms; operational risk, regulatory risk, legal risk, market risk, liquidity risk. You get the picture. It’s all about risk!

When I sat on the trading floor two risks we were particularly focused on post 2008/9 were Counterparty Risk i.e. was who I was trading with well capitalised and capable of meeting their obligations and ‘Wrong Way’ Risk (otherwise known as ‘risk on risk’) i.e. Accepting collateral correlated to the client (example being a Portuguese bank posting Portuguese government bonds as collateral on a position they held with us).

These two risks, if not prudently managed, can lead to spectacular disaster and so required diligent hedging and offsetting, almost on an hour by hour basis in volatile markets.

And so it was when I joined VoxSmart that I was amazed that there are firms out there ignoring BOTH of these fundamental principles of risk management when it comes to how they manage their domestic and international regulatory obligations associated with recording their telephone conversations and electronic communications.

So what do I mean?

Since 2011 Mobile Network Operators (‘MNO’s or Carriers’) in the UK have seen Mobile Voice Recording as an additional source of revenue in their slowly diminishing high margin model and a way of reprieving loyalty in an increasingly commoditised and fungible industry where customer loyalty is at an all time low.

Offering recording (proxy outsourced regulatory risk management) is of course fantastic corporate strategy from the MNO perspective, and I applaud their management for spotting the opportunity and trend, but for a bank to allow a carrier to manage their regulatory risk? I wouldn’t take the risk.

Why?

Banks, or any other enterprise customer for that matter, know not to put all their eggs in one vendor ‘basket’ because the vendor can and will become disincentivised to offer competitive rates and service levels. Customers should always retain an element of power, freedom and choice over their providers to ensure they are not being ripped off which they can exercise when the realise they are. Look at the disruptive force of price comparison websites for anything from car insurance to credit cards. Who actually auto renews their car insurance these days?

So if a carrier gets hold of a banks regulatory risk AS WELL AS their mobility contract where is the offset? where is the hedge? Surely this is the very definition of risk on risk and sometimes with MNO’s that are hemorrhaging cash on an unsustainable business model where Mobile Voice Recording isn’t their core competency; DANGER!

Regulation is aimed at increasing transparency and driving positive change for the safety and stability of markets. We therefore need to work as one cohesive group and address these challenges together otherwise, and call me risk averse, but isn’t outsourcing regulatory risk management to a carrier going against everything the college of global regulators have sought to achieve these past years?

Agree, disagree or simply want to get in touch?

Oliver

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Our COO Adrienne Muir is on the panel @FIAexpo in Chicago today talking about Women in FinTech:2.30 Nextgen Classroom, Silver Hall #FIAExpo

Another great Meet the Companies event today for advisers in Bristol. Thanks to @vTimeNet and @VoxSmartGlobal for joining us.

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