Strengthen resilience in risk management

Financial and operational resilience has been put to the test. Fortunately, for the most part, the banking sector has found a ten-year effort to build more and better capital and liquidity, and has enabled banks to contribute materially to supporting communities, economies and financial markets, everything. by remaining financially secure and strong.

“Changes that many thought would take years suddenly happened within weeks or months. The art of the possible became the art of the real.”

Technology systems, although in many cases legacy systems, have delayed and allowed employees to quickly transition to remote work on a scale never seen before. For the most part, the virtual and digital work channels to access products and services have worked.

But, the pandemic has also opened society’s eyes to broader dimensions of resilience. For starters, the resilience of the workforce has become more important. Not only have employers realized that the well-being of employees must be considered during the time of COVID-19, but it must be at the forefront of their thinking on an ongoing basis. This is especially the case today, a hybrid working model – combining home and office work – will be an enduring feature of the workplace.

Technological resilience has taken center stage as a result of the dramatic acceleration of digital transformation. Changes that many thought would take years suddenly happened within weeks or months. The art of the possible has become the art of the real.

This comes with exciting opportunities to deliver more value to customers and transform business models and ways of working. But new risks abound, including how to build resilience by design; carefully manage the transition to the public cloud; and govern and manage the risks associated with the large-scale use of machine learning (ML) and artificial intelligence (AI). Cyber ​​security concerns remain a priority, especially in a sustained remote working environment with an increased attack vector and so many more customers accessing financial services remotely than ever before.

Resilience then becomes the defining characteristic of the long-term success of banks around the world. Bank boards and senior management, advised by the Chief Risk Officer (CRO) and the risk team, must seize the potential offered by change, manage the associated risks and remain resilient in many complex dimensions.

Risk profiles

According to the recent EY IIF Global Bank Risk Management survey, over the past 12-18 months, bank CROs have identified a series of changing priorities for their teams and for boards.

Unsurprisingly, credit risk has become the number one risk for bank CROs around the world over the next 12 months. Banks entered the crisis in much better financial health than they did during the last global financial crisis (GFC), with significantly strengthened capital and liquidity positions. But the breadth, depth, and protracted nature of the economic shock induced by COVID-19 means that banks are focusing heavily on credit problems, although government support measures have been instrumental in sustaining businesses so far. now during the pandemic.

Cybersecurity remains a priority of course, especially with so many employees working remotely and with the prospect of remote working being a permanent feature of many workplaces. High-profile cyber attacks are also the reason why cybersecurity remains a priority for administrators and executives.

However, the risks that have been on the agenda the most are climate change and environmental concerns in general. Almost half of the CROs in the banks surveyed now see climate change as a major risk requiring their utmost attention over the next 12 months. Eighteen months ago, only 17% agreed.

CROs point out that this risk is also higher on the short-term risk agenda for boards: more than a third (37%) of bank CROs surveyed around the world believe their boards consider risk climate as a priority in terms of risk, compared to only 6% in 2019.

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