Risk Management: Navigating the Path to Success

Understanding Risk in Core Banking

Building a core banking platform involves significant technical complexity, regulatory requirements, and market dynamics. Proactive risk management is essential—not to avoid all risks, but to identify, assess, and mitigate the risks that could derail the venture.

Technical Risks

Risk	Probability	Impact	Mitigation Strategy
Ledger does not scale to 1M+ TPS	Medium	High	Early prototyping (Month 2-3), load testing, proven event sourcing patterns
Security vulnerability or breach	Low	Critical	External security audits, bug bounty program, SOC 2 certification
Regulatory compliance gaps discovered	Medium	High	Engage compliance counsel early, regulatory sandbox testing
Multi-tenancy data isolation failure	Low	Critical	PostgreSQL RLS, penetration testing, isolation validation tests
AI/ML model performance below targets	Medium	Medium	Start with proven models, A/B testing, gradual rollout

Technical Risk Mitigations

• Prototype Early: Build ledger proof-of-concept in months 2-3 to validate scalability assumptions
• External Audits: Engage third-party security firm for penetration testing before first customer
• Regulatory Expertise: Hire or contract compliance expert familiar with target jurisdictions
• Proven Patterns: Use established event sourcing frameworks rather than building from scratch

Market Risks

Risk	Probability	Impact	Mitigation Strategy
Thought Machine/Mambu drops prices aggressively	High	High	Focus on differentiation (AI, speed), not price alone
Slower customer adoption than projected	Medium	High	Conservative revenue projections, longer runway
Regulatory changes invalidate compliance approach	Low	Medium	Monthly regulatory monitoring, modular compliance engine
Market consolidation reduces opportunity	Medium	Medium	Build acquisition-attractive company, multiple exit paths
New well-funded competitor enters market	Medium	Medium	First-mover advantage in AI, customer lock-in through integrations

Market Risk Mitigations

• Differentiation Focus: Compete on unique capabilities (AI, speed, DX), not just price—price wars favor incumbents
• Customer Lock-In: Deep integrations and excellent service create switching costs
• Reference Customers: Prioritize quality over quantity—5 referenceable customers beats 10 struggling ones
• Regulatory Agility: Build compliance as modular, updateable rules rather than hard-coded logic

Operational Risks

Risk	Probability	Impact	Mitigation Strategy
Key person departure (founder, lead architect)	Medium	High	Knowledge documentation, equity incentives, succession planning
Unable to hire qualified engineers	Medium	High	Remote-first culture, India development center, competitive compensation
Customer implementation failures	Medium	High	Standardized methodology, dedicated CSM, implementation playbooks
AWS vendor lock-in limits flexibility	Low	Medium	Infrastructure as Code, container-based deployment, abstraction layers
Support scaling issues as customer base grows	Medium	Medium	Self-service tools, knowledge base, tiered support model

Financial Risks

Risk	Probability	Impact	Mitigation Strategy
Funding round fails or is delayed	Medium	Critical	18-month runway minimum, milestone-based spending
Costs higher than projected	Medium	Medium	20% contingency buffer, India cost model, vendor negotiations
Customer churn higher than expected	Medium	High	Excellent onboarding, proactive CSM, early warning systems
Revenue takes longer to materialize	High	High	Conservative projections, focus on signed contracts vs. pipeline
Economic downturn reduces fintech investment	Medium	Medium	Diversified customer base, focus on profitability path

Financial Risk Mitigations

• Runway Management: Maintain minimum 18 months runway; start fundraising at 9 months remaining
• Conservative Projections: Plan for 50% of projected revenue; celebrate when you exceed
• Milestone-Based Spending: Tie hiring and infrastructure investment to achieved milestones, not projections
• Multiple Funding Sources: Explore VC, strategic investors (banks, SIs), and revenue-based financing

Contingency Planning

Scenario Planning

Scenario	Trigger	Response
Funding Delayed 6+ Months	Series A not closed by Month 18	Reduce burn 40%, focus on break-even with current customers
Major Competitor Price War	Thought Machine drops prices 50%	Double down on AI differentiation, focus on segments they ignore
Key Technical Hire Leaves	Lead architect or CTO departure	Activate succession plan, retain with counter-offer or transition support
First Enterprise Deal Falls Through	Flagship customer churns in year 1	Intensive win-back effort, accelerate pipeline to replace ARR

Early Warning Indicators

Track these leading indicators to catch problems early:

Area	Leading Indicator	Warning Threshold
Sales	Pipeline coverage ratio	Below 3x of target
Product	Sprint velocity trend	Declining 2+ sprints
Customer	Support ticket volume	Increasing 20%+ month-over-month
Technical	P1 incident frequency	More than 1 per month
Financial	Burn rate vs. plan	Over 110% of budget
Team	Attrition rate	Over 15% annually

Board Reporting on Risk

What to report to your board monthly:

• Top 3 Risks: Current highest-priority risks with mitigation status
• Risk Trend: Is overall risk increasing or decreasing?
• Near Misses: Incidents that almost happened - learning opportunities
• Mitigation Progress: Status of key mitigation actions
• Emerging Risks: New risks identified this period