Financial institutions are reengineering risk management protocols, Deloitte study finds

Financial institutions are starting to reengineer their risk management programs, a new report from Deloitte Global claims.

Through a new survey of financial services executives conducted by the company, it found that 76 per cent of respondents either recently completed an update of their risk management program or have one in progress. An additional 12 per cent claimed to have plans in process for a renewal effort.

A big part of this regeneration will be through the use of emerging technologies, with 48 per cent planning to modernise their infrastructure with new technology such as robotic process automation (RPA), cognitive analytics, and cloud computing.

The most common technologies being utilised by institutions at the moment are cloud computing, big data and analytics, and business process modelling tools, with these used by 48, 40 and 38 per cent, respectively, of respondents.

Some of the other tools currently in operation include machine learning, RPA, and cognitive analytics, which includes natural language processes.

Reimagining Risk Management to Mitigate Looming Economic Dangers and Nonfinancial Risks is the eleventh biennial edition of the survey of financial institutions. The report is based on responses from 94 financial institutions from around the world and represents $291.1tn in aggregate assets. Respondents are made up of 61 per cent banking, 49 per cent investment management and 46 per cent insurance.

Deloitte Risk and Financial Advisory partner Edward Hida said, “Financial institutions face a formidable set of challenges posed by today’s more complex and uncertain risk environment. With budget cuts common — and a big focus on effectiveness and efficiency as the torrent of regulatory change has slowed — this will require institutions to rethink their traditional assumptions and employ fundamentally new approaches.

“Digital technologies have the potential to fundamentally reengineer virtually every aspect of risk management. Financial institutions are now at the early stages of this transformation of their risk management functions.”

The participants of the survey were asked what three risk types they believed would increase the most in importance over coming years. Two-thirds of respondents stated that cybersecurity was one of these; however, less than half of institutions stated they were well suited to combat this rising threat.

Deloitte US Risk and Financial Advisory Cyber Risk Services leader Ed Powers said, “In addition to their supervision of individual institutions, regulators across the globe are beginning to address the risks that cyberattacks could pose to the financial system as a whole,”

“Given the increasing interconnections among financial institutions, their technology partners and financial markets around the world, good cyber governance and oversight is imperative to the ability to respond and recover effectively when a threat is detected, or an attack is realized. It is well known that a cyberattack has the potential to quickly damage the global financial system.”

Other findings from the report was that 82 per cent considered their institution is effective in managing risk, rising from 69 per cent in 2016.


While institutions have improved in managing financial risk, non-financial related fears have increased. Only 57 per cent believed they are not managing reputation risk, 54 per cent worry they are not good with business resilience risk and 51 per cent feel more could be done with their model risk.

Other areas included conduct and culture risk (50 percent), strategic risk (46 percent), third-party risk (40 percent), geopolitical risk (35 percent) and data integrity risk (34 percent).

There has been a lot of new regulations entering the market over the past few years, and 83 per cent of respondents expect regulatory requirements to increase over coming years.

Copyright © 2019 FinTech Global

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