The future of risk management

The future of risk management

Risk managers are increasingly facing an uphill battle to effectively monitor and manage risks in a constantly changing political, economic and technological environment. With the constant race to stay ahead of competitors and ensure the latest technological advances and product mixes are on offer to customers, whilst managing and understanding the risks that these advances pose to the institution and customer. With each advancement comes another potential weak spot to the institution and customer, so how do risk managers support product development and compliance teams, alongside management of the increasing risks these advances pose?

The new technological and regulatory driven environment has driven a heightened focus across the board to balance innovation with security as is highlighted across the industry. Here at The Center for Financial Professionals, our research teams have conducted extensive first hand research into this area, meeting with some of the industry’s leading risk managers to review how they are grappling such a monumental, constantly evolving challenge. With different institutions taking vastly different approaches, the infrastructure required to support ever evolving technological advances is a huge drain on expenses and staff, with new advances comes new risks that need to be understood, monitored and managed. With FinTech investments increasing year on year, the digital pressures are more clear than ever and are signs of a changing tide and move towards a digital revolution in the industry. With so many technological advances, many posed the question, what role does the risk manager play in the future? With retail stores continually closing, or human interaction and customer service replaced with that of technology, and machine learning advances, how can these changes affect every day risk managers?

With the influx of technology advances and FinTech disruptions comes the influx of regulation to support and monitor innovation, regulators are tasked with aiding institutions in growth and strengthening their position within the economy, technology plays a pivotal part in this and regulators are faced with balancing growth with security. The focus has shifted towards a heavy focus on areas such as cyber and third party security as a result of heightened media scrutiny and a string of high profile security/data breaches. These breaches do not always have a significant direct monetary impact, however the repercussions can be felt long after the event in unquantifiable means. Therefore, it remains in every institutions best interest to ensure that they are prioritising security over competitive advantage, some would argue security can provide more of a competitive advantage with customers feeling protected.

Not only is the technological environment causing risk managers to question their role in the future, regulatory changes aside from security are painting a picture of the future that may be drastically different from their current status. Across Europe, we have seen the implementation of IFRS 9, a huge undertaking for all institutions and a fundamental change to many processes in better aligning risk and finance, and projecting the macro economic environment. The beacon now falls to the US to undertake the implementation of CECL, with the standard little understood as yet, it remains to be seen the similarities and differences between the European and US approach to the standard, with many asking how they can leverage European experiences to better aide their implementation?

As a result of the increase in both infrastructure, technology and regulation, many are missing the first stage and failing to prepare for the future and rapid changes in trends. Data underpins all operations and is the driving factor towards regulatory interaction and compliance. Data strategies and interpretations are hailed the foundations of which institutions must build, with many facing fundamental flaws in their data strategies, are they trying to build a castle on quicksand?  Often there is a narrow vision of setting data strategies and analytics to comply with single regulatory initiatives, with very few building data platforms across the enterprise to accommodate all regulatory changes and provide the historical data in a unified format. The ability to collect, format and collate historical data and use this for analytics and future outlooks is fundamental to the trend of the industry and rapid innovation. Institutions should broaden horizons and not only collect event data, but factors leading to the event to provide analytical conclusions using a range of variables and considerations. Strengthening data strategies and capabilities provides the platform or foundation of which everything else can be built from, including the above CECL which relies on historical data to predict future credit losses and macro economic scenarios.

In short, the industry is moving at a faster pace than ever, and it is a constant battle to stay ahead of the curve from a technology regulatory and competitive standpoint. Institutions face the struggle to balance innovation and compliance with security and customer satisfaction. The role of the risk manager is a role that is ever evolving, with machines looking to conduct tasks not possible by any human, what role do risk managers play in ensuring stability, security and accuracy in a technologically driven environment?

The 6th Annual Risk Americas, May 23-24, 2017 (NY Hilton Midtown) features a two day work stream reviewing the future of risk management, with specific focus around technology advances, FinTech disruptions, machine learning, data analytics, CECL, future regulation, embracing technology and utilising its potential and much more.

Join us at the New Yok Hilton on May 23-24, 2017 for two days of interactive discussions across insightful presentation and panel discussions from some of the industry’s leading risk managers, innovation specialists and solution providers.

Visit for all information, don’t miss out on North Americas leading risk management gathering.