Digital transformation and cybersecurity are top concerns of CROs

Risk management functions within financial services organizations are primarily concerned with cybersecurity and data-related risks at their firms, according to the EY and Institute of International Finance (IIF) eighth annual global bank risk management survey of Chief Risk Officers (CROs): Restore, rationalize and reinvent: a fundamental shift in the way banks manage risk.

Cybersecurity has surged as a concern with respondents, with 77% claiming it is one of the most important risks over the next year, a 22% increase since the 2015 survey. In addition, a majority of the banks surveyed (86%) cited data-related risks (availability, integrity, etc.) as a top emerging risk over the next five years.

Respondents noted that with ever-present cyber threats and digital disruption taking place, risk and compliance functions are prioritizing key tasks. The top critical roles within risk and compliance functions are: helping to identify risks and align strategic efforts with risk tolerance (71%), offering guidance on laws and regulations that could be interpreted as relevant to new technologies, products or services (49%) and providing review and approval prior to product launch (47%).

Banks are embracing new technologies such as blockchain, robotic process automation (RPA), chatbots and more. Survey respondents expect new techniques and technologies will drive down costs in risk management, notably through the use of automation (87%), digitization (64%), machine learning (59%) and risk models using artificial intelligence (AI) (57%). When it comes to implementing new technologies to drive digital transformation, the top three concerns of respondents are cybersecurity and shortage of IT resources/talent (both 64%) and also, cost (52%).

Tech on CRO

As the industry’s digital transformation accelerates, banks will move from exploring to implementing firmwide uses of new technologies in the middle and back office. This will challenge risk functions to change how they monitor banks’ risk profiles and enable innovation, and how they leverage new techniques to be smarter, faster and more cost-effective.

  • From operational streamlining to technology-driven transformation, banks are taking action to cut costs, with 83% of banks focused on data analytics over the next three years.
  • Plans to leverage new technologies to manage costs are in various states of progression. Digital and mobile infrastructure initiatives are the most advanced, while banks are taking first steps to automation and machine learning.
  •  As banks reinvent themselves using technology to drive digital change in the future, risk teams expect to do so, too.

EY Legal Services Contacts:

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Richard Goold – Global Technology Law Leader