What do you see as the major risks in 2024? Terror attacks, power outages, supply chain disruption, capital and borrowing costs, or perhaps more sophisticated cyber attacks? Well here are some insights from Protecht;
Protecht, a leader in risk and resilience software, today announced the findings of its ‘UK 2024 Financial Services Risk and Resilience Outlook’ research. The comprehensive survey, conducted amongst 400 key UK financial organisations, reveals an industry landscape increasingly impacted by geopolitical risks, significant investment in operational resilience and the major opportunities presented by technological and data strategy alignment across the sector. The survey, conducted across UK financial organisations of between 250-5000 employees, reveals that 26% of respondents view geopolitical events, including the aftermath of Russia’s invasion of Ukraine and tensions between the US and China, as the most critical risk area for the sector. This was followed by the risks presented by liquidity and access to capital, which was the top concern for 24%.
Tsambika Jeffries, VP, Enterprise Operational and Financial Risk, Zepz said: “The findings of the report do resonate for firms like ours; geopolitical uncertainty can impact us around the globe and operational resilience has been a key area of focus. As a fintech, we embrace new technology and are constantly striving to find ways to increase automation and efficiency. The benefits of AI could be considerable, as long as risks are carefully managed.” A further key finding of the report is the strategic advantage that financial organisations can gain through aligning their technology and data strategies. In particular, the survey highlights the ongoing reliance on manual processes in risk management, with 24% of respondents using manual processing for control evaluation and monitoring, 22% for incident/loss event management, 21% for policy management and 21% for risk assessment. This reveals the potential for digitalisation to enhance efficiency and compliance, particularly in light of new regulations such as the UK’s emerging climate change rules and the global standard for sustainability reporting. Looking further at the role of technology, financial organisations seem cautious about the use of generative AI, with 35% in the UK saying that they are already using it but have limited or no plans to further expand its implementation over the next 12 months. Summary of key research findings:
· Geopolitical Uncertainty: 26% of respondents identified geopolitical uncertainty as the top critical risk. Liquidity/Access to Capital: Nearly a quarter of the organisations surveyed (24%) highlighted liquidity and access to capital as a critical risk.
· Usage of Manual Processes in ERM: The survey found there is ongoing and considerable reliance on manual processes in key areas of Enterprise Risk Management (ERM).
· Generative AI Adoption: While 35% of UK financial organisations are using generative AI, they express limited or no plans for further expansion across the organisation in the next 12 months. Many in the risk domain have chosen to adopt a watching brief in 2024 whilst regulations evolve, and the capabilities become better understood.
· Operational Resilience Budget Allocation: More than half of the respondents (59%) have allocated a significant portion of their budget to integrating operational resilience within their ERM frameworks, suggesting a move to Phase 2 and need for digitisation of this exercise.
· Investment in Third-Party Risk Management: A significant majority of UK financial organisations surveyed (68%) plan to substantially increase investment in Third Party Risk Management (TPRM) solutions over the next 12 months as the burden of volume and shift in regulatory expectations drives additional rigour.
“This survey paints a picture of a financial services industry at a crossroads, with technology playing a pivotal role in navigating these changes,” said Gary Lynam, Managing Director EMEA at Protecht. “Firms are increasingly seeking to align risk management disciplines with technological advancements to build sustainable, resilient, and efficient operational frameworks. We urge organisations to embrace these technology-led changes to not only mitigate risks but also to harness new opportunities for growth and innovation.” Ben Lowing, Risk & Compliance Director at First Central Group, commented: “The Protecht survey provides a timely reminder to financial service organisations operating in a highly regulated environment of the scale, complexity and interconnectedness of the macroeconomic environment and the associated critical risk factors.
“In recent years First Central Group has gone through a very significant maturation of its Enterprise Risk Management (ERM) framework. In line with the key findings of the survey, we know it is imperative to invest in digitalised interconnected ERM frameworks and prioritise rigorous risk testing and processes. Financial organisations must be well prepared for the indeterminate geopolitical challenges ahead and ensure their Third Party Risk Management systems can meet the evolving regulatory landscape.” To download a full copy of the report, click here: https://www.protechtgroup.com/en-gb/guides/uk-2024-financial-services-risk-and-resilience-outlook
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