Risks facing the banking industry in both the short and long terms are changing materially.
Banks are facing risk challenges on a number of fronts – from new regulation, geo-political uncertainty, evolving consumer expectations, intensifying competition and advances in technology.
In this environment, banks will need to prioritise more than ever. An institution’s ability to stay the course with their business strategy, create management bandwidth, embrace digital change, manage regulatory priorities and prepare for a host of emerging risks will be essential.
How effectively banks are able to navigate these risks and opportunities will dictate their ability to continue to compete, grow and thrive in the coming years.
Globally, implementation of new regulatory and supervisory requirements remains a key industry focus. But, other priorities have also started to come to the fore.
According to the eighth annual global bank risk management survey conducted by EY and the Institute of International Finance (IIF), cybersecurity now tops the list of immediate risk concerns for both CROs and Boards.
Three-quarters (77 per cent) of CROs surveyed as part of the study cited cybersecurity as one of the most important risks for the year ahead, an increase of 26 per cent from the 2016 survey.
Also of note this year is the entrance of Risk-technology architecture onto the CRO list, a 23 per cent increase from last year’s survey results.
Locally EY observes increasing focus on ensuring the architecture supporting the risk function is not only compliant with the litany of regulatory requirements, but also enhances risk management across the three lines of defense and enables the business to successfully compete in the digital era.
The survey also polled participants on emerging risks. Participants identified data-related risks, such as data integrity and availability, as a key area of concern, with the majority of banks (86 per cent) citing it as their top emerging risk over the next five years.
Data could well prove to be a critical success factor both for incumbent banks and non-traditional technology players moving into the industry. Risk leaders recognise data is both a risk and a major opportunity.
Ensuring the confidentiality and integrity of data is paramount and, as more and more data becomes available from a range of sources, risk management functions will need to be able to manage, understand and use it optimally to inform key decisions.