BoU warns banks against data outsourcing
Bank of Uganda (BoU) has warned financial institutions against outsourcing data to third parties, saying they risk exposing client information and breaching confidentiality.
Speaking during the Inaugural Disruptive Technologies conference in Kampala, BoU Executive Director in charge of supervision Tumubweine Twinemanzi, said outsourcing data to third parties comes with a risk that could be costly not only to the affected persons (customers) but also the financial institution and the industry as a whole.
Banks, he said, must be extra careful while outsourcing some aspect of their businesses that are crucial even when such roles do not fall under the banking core functions.
“You will hear things like this is not your core business and it shouldn’t be your worry. So, hand it over to us so that you can focus on your key roles and functions, which is intermediation,” he said, noting that: “Some banks have done that already but then that introduces new risk called third party risk management.”
Handling confidential data
“…if you take over my back office, to what extent do I know that you can handle private and confidential data, which I am giving you access to in the same manner of confidentiality as I would have,” he added, warning financial institutions to be extremely careful.
Companies have in the past 10 years outsourced non-core functions, which creates third part risks. However, Dr Twinemanzi said, this must be pondered about, especially in the financial sector.
However, Mr Daniel Kaggwa, the Continuum Financial Group managing director, said that whereas he agreed with Dr Twinemanzi’s concern, there are various ways through which such concerns can be dealt with, stressing that those who ignore technology will do so at their own peril.
“The whole idea is to introduce the new technology to the market including artificial intelligence. The business environment has changed. New technologies such as artificial intelligence and robotic automation will continue to define how we conduct business or else you will be out of business,” he said.
