Today’s banking industry is volatile and full of risks, says EY’s global risk management survey, bringing plenty of challenges to chief risk officers. Conducted together with the Institute of International Finance (IIF), the survey polled the chief risk officers or other senior risk executives at 86 banks across 37 countries between June and September 2023. Of the participants, 12% were from globally systemic banks.
Most participants highlighted cybersecurity risks as a top priority, said senior manager Ken Mark Agustin during EY Luxembourg’s annual banking conference this week. Nearly three out of four (73%) of CROs listed cybersecurity as a point that would require attention, far ahead of the second-ranked issue: the implementation of regulatory rules or supervisory expectations (which came 37 percentage points behind, cited by 36% of respondents).
In previous surveys, “traditional financial risks” like credit risk, liquidity risk or interest rate risk tended to be at the bottom of the list. “It doesn’t mean that they are less important. It’s just that over time, banks have been more comfortable with the governance, policies, risk management appetite that they are implementing in relation to these traditional financial risks,” said Augustin. But because of recent events--an uptick in volatility, market uncertainty, geopolitical situations--those traditional financial risks “are climbing back up again in terms of the priority list.”
The survey also found that 69% of respondents said that cybersecurity risk was the issue that would require the most attention from the board of directors.
66% say liquidity risk is a top risk
When it comes specifically to financial risks, two-thirds (66%) of CROs cited liquidity or funding risk as a top risk.
Climate risk an important consideration
For over half of chief risk officers (56%), climate and nature-related risk will be the most important “emerging risk” over the next five years.
Process automation to boost transformation
Three-quarters of banks (74%) said they plan to accelerate digital transformation over the next five years through process automation (including intelligent automation), found the survey.
However, 54% cited the scale of change required as a main constraint, followed by limited budgets (48%).