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Is the finance sector ready for risk management in 2016?
Risk management is a key consideration for Australian finance companies but how are professionals in this field reacting to increased threats?
Risk managers need to become comfortable with data analysis.
The world of business is becoming increasingly more complex, creating new threats in amongst the opportunities.
As Australian companies prepare for the new year, professionals in finance jobs will need to be aware of the potential risks and how they will affect their business.
Recent report shows fears for the finance sector
In a significant deviation from historic trends, the fear of an unstable macroeconomic environment beat regulation as the biggest concern in PricewaterhouseCoopers' (PwC) most recent risk survey. The latter factor ranked at number three, showing that it is still a persistent challenge for many organisations.
An unstable macroeconomic environment was the biggest concern for the banking industry.
Financial crime, particularly the rise of cyberattacks, was also a challenge in 2015, rising from ninth place last year to the second spot. In fourth place was technology risk, followed by political interference (2), quality of risk management, credit risk, conduct practices, pricing of risk and the business model.
In reflection of these results, Global Financial Services Risk Leader Dominic Nixon stated that businesses need to start considering the complexity of modern risk management.
"Although much work has been done by banks and their regulators to strengthen risk controls, banks still have more to do to address the scale of risk and its ever-changing nature," he said.
With governance ranking as the 19th concern, it is important to have strong risk management and compliance leadership in order to handle these new challenges.
Are institutes doing enough?
Another key area of risk management is in operations. In a recent survey conducted by KPMG, only 17 per cent of global companies adequately align these efforts with the business strategy.
US Operations Risk Network Leader Tim Phelps explained the importance of adopting modern methods such as data analysis.
"Financial institutions must continue to evolve their operational risk management efforts due to heightened regulatory expectations and a focus on enhanced prudential standards for 'strong' risk management," he stated.
Coca-Cola Amatil Chief Risk Officer Andrew Wearne also recently highlighted the importance of data analysis from a practical perspective at a Risk Management Institution of Australia presentation. This method can be used to improve internal auditing and in testing fraud parameters.
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By Matthew Quinn