For nearly a decade, I have served on various advisory and supervisory boards of banks and financial services companies. In these uncertain times, discussions about strategy have become increasingly crucial. Surprisingly, many argue that strategy can be formulated independently of the people who will execute it, implying that any competent C-Suite should be able to successfully implement a given strategy. While this may hold some theoretical merit, the reality is often quite different.

Consider the case of a large investment bank attempting a rapid expansion into retail banking. While the strategy might look promising on paper, its success hinges on whether the existing leadership team possesses the skills and experience necessary to navigate this new market. A C-Suite accustomed to high-risk, high-reward investment strategies might struggle to adapt to the more conservative, customer-centric approach required in retail banking. Conversely, a retail banking specialist thrust into the leadership of a high-frequency trading firm might find themselves out of their depth.

Conversely, a well-aligned C-Suite can elevate a seemingly mundane strategy to new heights. For example, a fintech startup with a strong leadership team in technology and customer experience could turn a simple digital banking app into a disruptive force in the industry, leveraging their expertise to create innovative features and seamless user experiences that traditional banks struggle to match.

In my view, a strategy can only be successfully executed if there is a strong alignment between the strategy itself and the skills of the C-Suite tasked with its implementation. This is a two-way street: the skill set of the C-Suite both enables and constrains the potential strategies a company can pursue. I believe it is perfectly acceptable, and even advisable, to tailor a strategy to the specific strengths of a company and its leadership team. Just as a skilled conductor brings out the best in an orchestra by selecting music that suits the ensemble's strengths, so too should a company's leadership leverage their unique talents to craft a strategy that plays to their advantages.

In the ever-evolving financial services landscape, recognizing and embracing this symbiotic relationship between strategy and the C-Suite is not just a matter of good practice; it's a matter of survival.

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The accelerating pace of digital transformation in the financial sector has fundamentally altered the landscape of risks faced by banks. Operational disruptions caused by cyberattacks, technology failures, or third-party dependencies have the potential to trigger systemic crises across the interconnected financial system. In response to these evolving threats, the European Union's Digital Operational Resilience Act (DORA) represents a watershed moment, establishing a harmonized framework to enhance the sector's ability to withstand and recover from digital disruptions. For supervisory board members of banks, DORA signifies a call to action, demanding a renewed focus on digital operational resilience and a comprehensive oversight approach.

DORA goes beyond existing cybersecurity regulations by mandating in-depth ICT (Information and Communication Technology) risk management across the entire financial ecosystem. Supervisory boards hold the primary responsibility for ensuring their institutions are adequately prepared for the challenges posed by DORA. This entails a profound understanding of the regulation's core principles, a strategic recalibration of risk management approaches, and a commitment to fostering a culture of resilience across all organizational levels.

Effective ICT incident management is another cornerstone of DORA compliance. Supervisory boards must play a crucial role in defining incident reporting thresholds, escalation procedures, and communication protocols with both internal and external stakeholders. DORA emphasizes the need for swift and decisive action in the face of disruptions, as well as thorough analysis of root causes to prevent future recurrences. Board oversight in this area helps drive continuous improvement in the institution's ability to manage operational crises.

The implementation of DORA goes beyond technical compliance; it necessitates a culture where digital operational resilience is a top priority. Supervisory boards are best positioned to lead this cultural transformation. Through communication, incentives, and accountability mechanisms, board members can promote resilience-focused behavior across the organization. This translates into investing in robust technologies, proactively identifying and mitigating risks, and emphasizing the importance of effective incident reporting and response.

When it comes to overseeing a bank's digital transformation, board members play a critical role in setting strategic direction and ensuring that the organization achieves its objectives effectively. Key Performance Indicators (KPIs) are essential tools for board members to monitor progress, assess the impact of digital initiatives, and make informed decisions. 

Beyond mere tracking, KPIs serve as litmus tests for evaluating the success or need for course correction in transformation efforts. They provide evidence of ROI for significant digital investments, aligning with boards' fiduciary duty to shareholders. Moreover, KPIs aid in risk management by tracking potential threats like cybersecurity, enabling proactive measures to address vulnerabilities. By benchmarking against industry standards, boards gain insight into the competitive landscape, shaping strategies for maintaining competitiveness.

Enclosed 25 KPIs are indispensable for board members during a bank's digital transformation:

I) Customer Experience & Adoption KPIs provide insights into how well the bank is meeting customer expectations and adapting to changing preferences. Board members need to understand the level of digital channel usage, Net Promoter Score (NPS) for digital channels, Digital Adoption Rate, Customer Effort Score (CES), and Self-Service Completion Rate to gauge the success of digital initiatives in enhancing customer experience and driving adoption. By tracking these metrics, board members can ensure that the bank remains customer-centric and competitive in the digital age.

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„Digital banking transformation is not a choice—it's imperative for survival.“

The banking sector stands at the precipice of unprecedented change, driven by the inexorable march of digital transformation. In this era, where adaptation is synonymous with survival, the role of board leadership in steering financial institutions towards a digitally empowered future cannot be overstated. Proactive board leadership is crucial to help financial institutions not only keep pace but lead the way in crafting the bank of the future.

In my experience the following five imperatives for board members are crucial for effectively navigating the digital landscape, ensuring not only the relevance but also the leadership of their institutions in shaping the bank of the future.

1️⃣ Digital as Core Strategy

In the digital age, strategy cannot afford to treat transformation as an ancillary endeavor but must integrate it as the very essence of the institution's trajectory. Board members must be the vanguards in this endeavor, asking pertinent questions, driving alignment, and identifying requisite digital talent. Key performance indicators (KPIs) such as Digital Channel Adoption Rate, Digital Sales Percentage, and Cost-to-Income Ratio serve as crucial barometers in assessing the efficacy of digital strategies.

2️⃣ Cultivating a Culture of Innovation

The ethos of innovation must permeate every facet of traditional banking institutions, necessitating a cultural metamorphosis. Board members play a pivotal role in championing agility and collaboration, fostering an environment conducive to rapid experimentation and cross-functional partnerships. KPIs such as Time-to-Market for New Products/Features, Employee Engagement with Innovation Initiatives, and Customer Feedback on New Features are instrumental in gauging the institution's innovation quotient.

3️⃣ Evolving the Customer Experience

In the digital realm, customer experience reigns supreme, and board members must prioritize its enhancement. Advocating for the voice of the customer, championing seamless journeys, and tracking KPIs such as Net Promoter Score, Digital Self-Service Resolution Rate, and Channel Abandonment Rate are imperative in ensuring that the institution remains attuned to evolving customer expectations.

4️⃣ Leveraging Data as a Strategic Asset

Data emerges as the linchpin in the digital banking paradigm, necessitating a strategic approach guided by board leadership. Establishing robust data governance policies, fostering insights-driven decision-making, and tracking KPIs such as Data Quality Index, Insights-to-Action Time, and Customer Personalization Effectiveness are pivotal in harnessing the transformative power of data.

5️⃣ The Cybersecurity Imperative

As banking operations traverse the digital realm, cybersecurity assumes paramount importance, demanding unwavering vigilance from board members. Oversight, a proactive stance, and adherence to compliance standards become non-negotiable imperatives. Tracking KPIs such as Number of Security Incidents, Incident Response and Recovery Time, and Compliance with Security Standards are indispensable in safeguarding the institution against cyber threats.

Conclusion

In conclusion, the digital revolution presents both unparalleled opportunities and formidable challenges for the banking sector. Board leadership, armed with a keen understanding of the imperatives outlined herein, holds the key to navigating this tumultuous terrain successfully. By embracing digital transformation as a core strategy, fostering a culture of innovation, prioritizing customer experience, leveraging data strategically, and fortifying cybersecurity measures, board members can chart a course towards a future where their institutions not only survive but thrive in the digital age.

The cryptocurrency and blockchain industry has the potential to reshape our perspectives on money, ownership, and trust. Cryptocurrencies and blockchain technology facilitate faster, cheaper, and more secure transactions, extending beyond digital currencies to include ICOs, STOs, and NFTs, among others. The current market cap of cryptocurrencies and blockchain tokens is approximately $1.76 trillion, representing nearly 2% of all global money.

As of August 2023, major cryptocurrencies such as Bitcoin, Ethereum, Ripple, Cardano, Dogecoin, and Tron are experiencing over 8 million daily transactions, a significant increase compared to August 2016.

Back in 2015, the World Economic Forum predicted that by 2027, around 10% of the global gross domestic product (GDP) would be stored on blockchain technology. Current trends indicate that this projection is on track. Notably, recent SEC approvals for cryptocurrency ETFs and new regulations like the European MiCA (Markets in Crypto-Assets) regulation are expected to further propel the crypto industry.

While the cryptocurrency and blockchain industry is still in its infancy, it is crucial for members of the board of directors to delve into key themes before these factors impact a company’s business model. It is recommended to gain insights into potential disruptions, new business opportunities, basic concepts and technologies, relevant laws and regulations, potential risks, and the dynamics of an emerging industry.

1. Potential disruption of several industries 

There are several industries that are potentially disrupted by cryptocurrencies and blockchain technologies. Members of the board of directors should observe the following industries and look for signs of disruption.

Supply chain management: Blockchain technology can enable increased transparency and security in supply chain management, allowing for more efficient tracking of goods and materials.

Real estate: Blockchain technology can be used to create a more efficient and transparent system for buying and selling property, as well as for tracking and managing property ownership.

Healthcare: Blockchain technology can be used to securely store and share medical records, as well as to facilitate more efficient and secure communication between healthcare providers.

Gaming & entertainment: Cryptocurrencies and blockchain technology can be used to enable new forms of digital ownership and monetization of in-game assets.

Retail: Cryptocurrencies and blockchain technology can be used to enable secure and transparent transactions between retailers and customers, as well as to improve supply chain management and inventory tracking.

Financial services: Cryptocurrencies and blockchain technology have the potential to disrupt traditional financial services by providing a more inclusive and accessible way for individuals and businesses to access financial services, such as banking and payments.

3. Basic concepts & technologies

It is recommended to introduce the basic concepts and technologies behind cryptocurrencies and blockchain to the members of the board of directors. Decentralization, immutability, transparency, cryptography, smart contracts, distributed ledger, limited supply, anonymity, borderless and digital are the most central ones.

Decentralization: Blockchain technologies and respective cryptocurrencies are decentralized, meaning they are not controlled by any single entity or organization. Crypto currencies are not controlled by any central authority such as a government or central bank. This allows for increased autonomy and control for users over their own funds.

Immutability: Once a transaction is added to a block and the block is added to the blockchain, the information in that block cannot be altered. This ensures the integrity and immutability of the data and crypto currency transactions stored on the blockchain.

Transparency: Blockchain technology allows for increased transparency by providing a public, tamper-proof record of all crypto currency transactions.

Cryptography: Blockchain and crypto currencies use cryptography to secure and protect transactions, making it a secure technology for storing and sharing sensitive information. This also ensures the integrity and security of crypto currencies.

Smart Contracts: Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. These contracts can be stored and replicated on the blockchain network. 

Distributed Ledger: A distributed ledger is a database that is spread across a network of computers. Each copy of the database is identical and is updated simultaneously.

Limited supply: The total supply of most cryptocurrencies is limited, meaning that there is a maximum number of units that can be created. This can help to prevent inflation and ensure the value of the currency remains stable.

Anonymity: Cryptocurrencies can provide a high level of anonymity for users, as transactions are recorded using a public key rather than a name or personal information.

Borderless: Cryptocurrencies can be sent and received from anywhere in the world, and the transaction can be done almost instantaneously, regardless of geographical boundaries.

Digital: Blockchain & cryptocurrencies exist only in digital form and are stored and transferred electronically.

4. Relevant laws & regulations

Members of the board of directors should consider a number of laws and regulations related to cryptocurrencies and blockchain when developing their policies and procedures. It is important to note that the laws and regulations surrounding cryptocurrencies and blockchain technology vary by jurisdiction.

In June 2023, the European Union implemented one of the most advanced crypto regulations: 'MiCA' - The Markets in Crypto Assets Regulation. 

Some of the most relevant general laws are AML, KYC, taxation, securities, GDPR and smart contracts regulations:

Security risks: Cryptocurrencies and blockchain transactions are vulnerable to hacking, fraud, and other types of cyber attacks, which can lead to financial losses for the company.

Compliance risks: Cryptocurrencies and blockchain technology are still largely unregulated, and companies may not be fully aware of the legal and compliance requirements related to their use.

Volatility risks: The value of cryptocurrencies can be highly volatile, which can lead to significant financial losses for a company if they are holding a significant amount of cryptocurrency assets.

Operational risks: Implementing and using blockchain technology can be complex and may require significant resources and expertise, which can lead to operational challenges and disruptions for a company.

Reputational risks: Companies that are associated with cryptocurrencies and blockchain technology may be perceived as risky or untrustworthy by some customers, investors, and partners.

6. Dynamics of the early industry

The early cryptocurrency and blockchain industry sometimes feel like Wild West and has several key dynamics that members of the board of directors should be aware of.

High volatility in prices, as the market is still relatively new and uncertain. 

A high degree of speculation, as many investors buy cryptocurrencies in the hopes of making a quick profit.

A lack of regulation, which has led to a Wild West atmosphere and a lack of protection for investors.

Innovation and experimentation, as many companies and individuals are working to find new use cases for blockchain technology.

Heavy competition, as there are many different cryptocurrencies and blockchain projects vying for market share.

High growth potential, as the technology is still in its early stages and has the potential to disrupt a wide range of industries.

High speed of technological changes with new crypto currencies and different blockchain versions coming up every now and then.

Finally,  it's worth noting that while the crypto-currencies and blockchain industry is still in its early stages, regulations and institutional involvement have been increasing which may change the dynamics of the industry.

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