Bringing digital to risk management: An interview with Mark Cooke

by Henning Soller

Welcome to McKinsey’s Tech: Forward podcast. In this episode, Henning Soller, a partner in McKinsey Technology, talks with Mark Cooke, leader of Innovation Data Platform (iDP), to discuss business building and propelling digital innovation in risk management. Their conversation covers challenges in the financial risk-technology and regulatory-technology spaces, as well as the role of technology partnerships in enhancing compliance, usability, and security, which in turn enable greater integration across the ecosystem. The conversation focuses specifically on the role of intermediaries in facilitating the integration. An edited transcript of their conversation follows.

Henning Soller: Mark, please give us a quick introduction to iDP and what you’re in the process of doing.

Mark Cooke: What we’re building with iDP is a technology company that can help financial services institutions innovate their risk management. We want to help banks and insurers digitalize their risk management by bringing data and technology together. We’re not here to build the solutions that help banks manage their risk; our proposition is to create a space where we can bring the banks and insurers together with innovative providers, solutions, and regulatory-tech and risk-tech companies.

Henning Soller: What are some of the challenges you are trying to solve for banks and insurers?

Mark Cooke: From the perspective of trying to manage risk in that environment, the cost that we see within banks and insurers today is primarily around the arms and legs. They’ve been relatively slow to use technology and automation to drive risk management. That’s where the opportunity is. While we’ve seen businesses build out and digitalize, we haven’t seen the same thing within the risk and compliance community. There is a desire to do that, and banks have looked to do that unilaterally. But it hasn’t really worked, because they haven’t been able to find the talent and the capability or to get over the conservative inertia within banks in that space.

We’ve seen real growth in this regulatory-tech and risk-tech space, but bilateral interaction between those parts and banks is problematic. There are a lot of barriers to bringing those two parties together. We want to make it easier for these two parties to work together, to create value, and to digitalize risk management. We can do that by bringing automation, cognitive applications, advanced analytics, and pattern recognition at scale. We can create interoperability via data pooling or data sharing, or by helping these applications be modular and integrate with each other. This way, we can build a system of solutions and capabilities that are tailor-made for particular businesses and use cases within the industry. That can help address some of the monolithic structures we see in risk management and reduce the technical debt in this space.

Henning Soller: How do you work with banks to help them address these challenges?

Mark Cooke: Early on, we decided that if we’re going to build a platform, then we would establish standards to make that platform work in a way that creates trust. We decided that we wanted feedback from the banks and insurers, so we had an initial call with a “pathfinder” community to understand how this platform needed to operate from a technology perspective. That helped us iron out the design and some aspects of how we run this business in conjunction with the people that we’re building this business for.

Henning Soller: You’re in a bit of a special situation, since iDP is tightly coupled with ORX, which is the operational risk association for major banks worldwide. How has this helped you, and how has this created challenges when it comes to building a new business?

Mark Cooke: It is, of course, helpful to have a community of banks and insurers that we can connect to the platform and that will engage with us because they are used to working with ORX. We can stand on the trust that’s been developed by that enterprise over the past 20 years. And it gives us those first use cases. We can bring products and services on behalf of ORX. We will be looking to re-platform some of the ORX infrastructure to benefit from the investment that we’re making around building out this platform.

On the flip side, being closely coupled with an industry association, especially a not-for-profit one, makes it harder to separate yourself and position the organization to attract the capital and the talent it needs to grow. This needs to be a stand-alone commercial organization and a high-growth tech company. At some point, we need to make the distinction that while iDP will be in part owned by ORX, it is a business in its own right.

Henning Soller: What have you learned during this journey over the past couple of years? If you could go back, what are some of the things that you would do differently?

Mark Cooke: We’ve certainly learned it’s hard. We could have more crisply defined what the company is seeking to be. Because we were working through ORX, I think we blurred the description of what we were seeking to do with the description of how our business would operate. Increasingly, we should be focused on making sure we have a proposition that we can not only sell with but that also makes this business attractive for investors so we can create the ability to scale.

One of the challenges is the simple fact that it’s never easy to build a platform. It isn’t something that you do overnight. I think we found it’s going to take us longer to get this business up and running and proved out than we’d initially anticipated. But I suspect that’s a common challenge for entrepreneurs. It has taken time to work with our infrastructure providers and our cloud service provider to understand how this business is actually going to operate. When you’re dealing with something of this level of complexity, it takes more time than you think to really master it and decide what you’re going to build, how you’re going to build it, and how to execute it effectively.

Mark Cooke is the leader of Innovation Data Platform (iDP). Henning Soller is a partner in McKinsey’s Frankfurt office.

Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of McKinsey & Company or have its endorsement.