Financial Crime World

Financial Institutions’ Risk Management Priorities Shift Amid Global Uncertainty

As the financial services industry continues to navigate unprecedented changes, including the rising importance of non-financial risks in the post-Royal Commission era, environmental, social and governance (ESG) concerns, and the impact of COVID-19 on global economies, risk management has become a critical component of business strategy.

Investing in Data and Technology to Drive Productivity Growth

  • Good quality data management is now essential for advanced analytical techniques and technological enhancements.
  • Financial institutions are seeking to improve, rather than ignore, legacy data to obtain richer insights.
  • Analytics on-demand and AI-based solutions are being used to optimize risk management and boost effectiveness.
  • Risk functions will need to develop a broader technology vision and integrated roadmap aligned with other parts of the organization.

Looking Ahead to Build Sustainable Growth

  • The traditional risk disciplines and improvements in financial risk management cannot be lost, but it is more important than ever for risk managers to look ahead rather than analyzing past issues.
  • Leveraging remediation projects to drive proactive risk management approaches can help organizations move towards sustainable growth.
  • The risk profile of financial institutions continues to shift towards non-financial risks, including cyber risks, fraud, money laundering, ESG concerns, and operational resilience.
  • Planning and investment will be necessary for the depth and breadth of capabilities required in the risk function of the future.

Building a Cross-Functional and Integrated Risk Management Approach

  • Risk functions are becoming more dynamic and flexible, contributing to leading financial institutions through complex and volatile landscapes.
  • A holistic view is being applied to risk management, with increased expectations for the first line of defense - “the business” - to take ownership of risk management.

Establishing a Blueprint and Change Agenda

  • A clear image emerges of the transformation agenda for risk management in the future: embedding risk in strategy and decision-making, enhancing stress testing capabilities, digitizing non-financial risks, building operational resilience, and developing platforms to deploy technology at scale.
  • The next five years will continue to result in major changes to the risk function, and stakeholders’ expectations will shift. Risk leaders are in a powerful position to seize this opportunity and position themselves to help lead business-wide transformation and enable sustainable growth.

Conclusion

The article highlights the need for financial institutions to adapt their approach to risk management in order to stay ahead of the curve and build sustainable growth. With the rapid pace of change, it is crucial that risk managers look ahead and position themselves to take advantage of opportunities rather than being caught off guard by unexpected challenges.