Risk Management News

Financial sector refocuses risk management processes

Risk management depends on a collaboration between employees and technology. How are these processes affecting the financial industry?

While risk management is a universal concern for organisations in a range of different industries, there are some developments that stand to affect some businesses more than others. 

Recent reports have suggested that the financial sector, one mostly comprised of larger enterprises, is beginning to face its own unique risk management and compliance concerns. 

In many cases, these concerns are evolving from the fact that financial services now have a new wave of competition to contend with. According to Accenture, the amount of funding offered to financial technology (fintech) startups tripled in 2014. As these disruptive and agile companies begin to gain more attention and offer products and services that rival traditional banks, it's likely to impact risk management processes in the sector. 

What defines risk management in the financial sector?

According to McKinsey & Company, the rate of change reported by Accenture is already being reflected by many major banking service providers. However, while a number of these organisations are already reacting to these new demands, McKinsey & Company noted that risk management in these cases is an ongoing procedure, not a one-off decision. 

McKinsey & Company offered its insights into how it expects risk management to evolve in the coming decade, but notes that these solutions are at the mercy of any trends that may change in the meantime. As new fintech companies continue to innovate in the sector, businesses need to have plans that can adapt and evolve as required. 

It's not surprising that the future of risk management will involve the digitalisation of many key services. The benefits of doing this are two-fold. On one hand, the automated processes free up time for employees to direct more of their attention toward more pressing concerns. On the other, digital process offer more opportunities for data collection and its subsequent analysis, provided organisations have invested in these capabilities. 

McKinsey & Company believes the two traits that will define a successful risk management process by 2025 are seamlessness and collaboration. 

Technology both a blessing and a curse for risk management

In the examples described above, technology is presented as a potential solution to risk management concerns. However, a recent report from Ernst & Young found that investment in new technology solutions can create risk management concerns as well as solve them. 

According to the organisation, executives indicated that cyber threats are now one the biggest risks for fraud in modern organisations, revealing that while technology can be a solution, improper investment and management can quickly turn it into a negative. 

Ethos BeathChapman is an Executive Recruitment Specialist focussed on the mid-senior candidate market across Asia, Australia and EMEA.

By Matthew Quinn