Innovation risk management in financial institutions

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The extensive use of financial technologies and innovations in the provision and utilization of financial products and services causes new risks that require constant attention. The article aims to improve innovation risk management methods to increase the operational stability of financial institutions in Ukraine. By generalizing international practice, the types of innovation risks are classified, and their impact on the activities of financial institutions and consumers is characterized. The attention is drawn to the control strengthening over the impact of operational and regulatory risks, based on important theoretical provisions contained in WBG, BIS, BCBS, and FSB documents. An organizational scheme for the interaction of a financial institution and an IT company is proposed to conclude “smart contracts” based on the use of a cloud service and blockchain technology. The authors propose additional methods of insurance protection and compensation for losses caused by the implementation of risks of using ICT and innovation based on creating the Collective Risk Insurance Fund of financial institutions; offer approaches to the calculation of variable and fixed parts of the contribution to the insurance fund for certain groups of financial institutions. It is concluded that to maintain the proper operational stability of financial institutions in Ukraine, it is necessary to introduce additional collective compensation methods for the risks of innovation and the strengthening of cyber threats.

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    • Figure 1. Organization of work on the provision of financial services using cloud service and blockchain technology
    • Figure 2. Scheme of building and using an innovative risk management model in financial institutions
    • Figure 3. Orientation of innovation risk management procedures in financial institutions
    • Figure 4. Options for organizing a Collective Insurance Fund for ICT and innovation-related risks of financial institutions and increasing cyber threats in Ukraine
    • Table 1. Classification of innovation risk types in financial institutions by individual characteristics
    • Table 2. Characteristics of the impact of innovation risks on financial institutions and consumers
    • Table 3. Rates of the fixed part of the contribution to the insurance fund for certain groups of financial institutions
    • Conceptualization
      Svitlana Mishchenko, Svitlana Naumenkova, Volodymyr Mishchenko
    • Writing – original draft
      Svitlana Mishchenko, Volodymyr Mishchenko
    • Writing – review & editing
      Svitlana Mishchenko, Svitlana Naumenkova
    • Methodology
      Svitlana Mishchenko, Svitlana Naumenkova, Volodymyr Mishchenko
    • Project administration
      Svitlana Naumenkova
    • Supervision
      Svitlana Naumenkova
    • Investigation
      Volodymyr Mishchenko, Dmytro Dorofeiev
    • Formal Analysis
      Dmytro Dorofeiev
    • Resources
      Dmytro Dorofeiev
    • Visualization
      Dmytro Dorofeiev