Financial services companies look to increase risk management investment

Sean Dudley
Sean Dudley
By Sean Dudley on 11 May 2015
Financial services companies look to increase risk management investment

Almost nine in ten financial services firms plan to increase their investment in risk management capabilities over the next two years in response to the emerging risks of cyber security and fraud.

This is according to Accenture’s 2015 Global Risk Management Study, which surveyed more than 450 senior risk management executives in the banking, capital markets and insurance industries.

86% of respondents said their organisation planned to increase investment in risk management in the next two years, with more than a quarter saying the increase would be more than 20%.

29% of respondents said their company intended to increase investment in cloud and software-as-a-service, big data and analytics by more than 20%.

The report found that cyber security and fraud is having an increasing impact on financial services firms and risk management.

34% of respondents indicated that cyber risk is the most-needed capability in their risk function. 65% said cyber and IT risk will have an increased impact over the next two years with regards to their business.

“The combination of market forces, advances in technology and customer demands are pushing financial institutions to become more digital and requiring a broader range of skills from today’s risk management professionals,” said Steve Culp, senior global managing director for  Accenture Finance and Risk Services. “Financial services firms are struggling to keep pace with the demand for people with highly specialised skills, such as cyber risk experts, business analysts, security specialists and fraud experts. To fill these gaps, most firms will have to look outside of their organisations — and the competition for the right people is increasingly intense.”

In the current low-growth, low-return financial environment, businesses are having to focus on new ways to bring about profitability. 43% of respondents said they have a higher risk appetite when developing new products, while 36% have a greater appetite for taking on major digital initiatives.

“At a time when the regulatory focus has never been keener, financial services firms are taking a hard look at their existing strategies and starting to identify where they want to extend their business to achieve growth,” said Culp. “The willingness to accept greater business risks will also expose financial services firms to emerging risks – including cyber, data privacy, reputational, social media and new conduct risks – requiring risk professionals to play an enhanced role.”

The survey also found that chief risk officers (CRO) are looking to play a more strategic role for companies. However, only 36% of capital markets respondents and 29% of banks said that their senior managers go beyond basic regulatory compliance when delivering regulatory change programmes.

For companies that do go beyond basic compliance however, there is greater coordination between the risk function and the rest of the business on regulatory issues.

The majority of respondents said that more needs to be done before risk management becomes fully aligned with broader strategic planning. 83% of respondents said they felt risk management was helping to bring about long-term profitable growth for their company, but 73% said the trust of the business remains a top challenge to their effectiveness. Only 17% said that their company had a framework in place that supports major decision-making with input from risk management.

“CROs can help their institutions become digital leaders by capitalising on the insights generated from the wealth of data they hold,” Culp said. “While many have said the increase in data has posed a challenge, risk teams can free up time by automating data collection and analysis in order to focus on more strategic management activities. Better data is required by regulation, but it will also help CROs advise their stakeholders on meeting key goals around risk-adjusted profitability and performance.”

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