As financial services institutions grapple with efforts to control costs and mitigate risks, chief risk officers (CROs) in Canada and the U.S. expressed the most confidence in their firms’ ability to manage exposure to key risks, according to Deloitte LLP’s 10th annual global risk-management survey.
The results of the survey of CROs from 77 global financial services institutions in Latin America, the U.S., Canada, Europe and Asia-Pacific found that 89% of survey participants in Canada and the U.S., specifically, were more likely to assess their firm’s risk-management program as “extremely” or “very” effective compared with 65% in Europe and 63% in Latin America.
When it comes to managing traditional risks, such as those associated with liquidity, underwriting/reserving and credit, about 80% or more of survey participants, overall, indicated that their organizations were well prepared to tackle each of those challenges.
However, Deloitte’s research found that survey participants feel their firms’ programs to deal with newer threats such as cybersecurity, the geopolitical environment and data integrity, are less effective. For example, only 42% of survey participants said their firms are well prepared to handle cybersecurity threats.
“Risk-management programs will need to not only become more effective and efficient, but also acquire the agility to respond more flexibly and nimbly to the next set of demands,” says Edward Hida, global risk and capital management leader at Deloitte, in a statement.
However, 52% of survey participants expressed concern over the capacity of their firm’s risk technology to keep pace with the changing regulatory environment. Even as pressures to cut costs on every front mount, many (42%) expect their companies to ramp up spending by 10% or more on acquiring new technologies.
In Canada and the U.S., survey participants were more likely to indicate that managing the risks related to “increasing regulatory requirements and expectations” would be a key priority during the next two years. That seems to be in step with the “pace of regulatory changes” that both countries are experiencing, Deloitte’s report finds.
In contrast, those in Europe were more likely to cite the increased role of the board of directors in risk assessment as a priority.
With talk of changes to the regulatory environment brewing in both Canada and the U.S., about 78% of survey participants from these countries placed greater concern on the costs that tighter regulations would have on businesses compared with their counterparts in Latin America (38%) and Asia Pacific (26%).
Deloitte’s study, which examines the risk-management practices of financial services institutions across the world, includes the insurance, banking and investment management sectors. As an aggregate, the institutions have total combined assets of $13.6 trillion but, overall, the sample represents a range of companies, from small institutions with less than $10 billion in assets to large institutions with more than $100 billion in assets.
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