Heightened uncertainty signals new challenges ahead
In the years since the global financial crisis, financial institutions have had more time to understand the practical implications of these new regulations and what is required to comply.
Today, risk management is becoming even more important; financial institutions confront a variety of trends that have introduced greater uncertainty than before into the future direction of the business and regulatory environment. Economic conditions in many countries continue to be weak, with historically low interest rates. The UK referendum to leave the European Union (Brexit vote), coupled with US President Donald Trump’s pledge to renegotiate trade agreements with China and Mexico, raise the possibility that trade volumes may decline.
The continual increase in regulatory requirements may abate or even be reversed in 2017 as President Trump and others have questioned whether regulatory oversight has gone too far. Strategic risk is increasing as entrepreneurial fintech players are competing with traditional firms in many sectors. The rapidly changing environment suggests that risk management programs may need to increase their ability to anticipate and respond flexibly to new regulatory and business developments and to emerging risks, for example, by employing predictive analytics tools.
Deloitte’s Global risk management survey, 10th edition assesses the industry’s risk management practices and the challenges it faces in this turbulent period. The survey was conducted in the second half of 2016—after the Brexit vote in the United Kingdom but before the US presidential election—and includes responses from 77 financial services institutions around the world that conduct business in a range of financial sections and with aggregate assets of $13.6 trillion.
Cybersecurity. Only 42 percent of respondents considered their institution to be extremely or very effective in managing cybersecurity risk. Yet, cybersecurity is the risk type that respondents most often ranked among the top three that would increase in importance for their institution over the next two years (41 percent). In recognition of the broad senior management and board awareness of cybersecurity risks, most respondents did not report challenges in securing funding or in communicating with senior management or the board. However, many boards of directors face the challenge of securing sufficient technical expertise to oversee the management of cybersecurity risk. The issues cited most often as extremely or very challenging were hiring or acquiring skilled cybersecurity talent (58 percent) and getting actionable, near-real-time threat intelligence (57 percent).
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