Canadian financial institutions are most worried about cybersecurity and geopolitical risks this year, according to a report from the Global Risk Institute (GRI) released Friday. Other top concerns include the economy, technology and third-party risks.
Geopolitical risks mainly stemmed from strained trade relationships, tariff threats and uncertainty about political leadership in Canada.
“Geopolitical tensions are creating an environment of unpredictability, where businesses may hesitate to invest or expand due to fears of sudden policy changes or retaliatory measures. This uncertainty can stifle economic growth and innovation, as companies may prioritize risk management over strategic development,” one chief risk officer told researchers.
More than four-fifths (82%) of organizations surveyed said cyber risks were likely to materialize and 44% said it would be difficult to manage. The rapid proliferation of artificial intelligence (AI) makes this risk difficult to navigate. Unlike long-standing core competencies such as credit, market and economic risks, most financial institutions don’t have a high level of expertise in cyber risk, the report said.
On the flip side, while 64% of organizations said economic risk was likely to be a significant concern, only 11% believed it would be difficult to manage. Despite the economic uncertainty caused by U.S. President Donald Trump’s tariffs, “financial institutions signalled confidence in their ability to manoeuvre this complex landscape given years of managing different types of business cycles,” according to the report.
The primary technology concerns are disruption by AI or machine learning. Two-fifths of respondents said the pace of competitors adopting new technology was a high or major risk. Other concerns included the reliability of AI models, followed by AI regulation and the organization’s ability to adapt to change.
“AI is a disruptor and game changer, and we are on the precipice of a significant change,” a respondent said in the survey.
For the first time since the survey began in 2014, financial institutions said third-party risk was one of the top five risks to the Canadian financial system. Financial institutions are increasingly relying on external service providers for technology and AI services amid tightening regulatory requirements, which require closer oversight of third-party relationships, the report said.
The survey was conducted from November 2024 to January 2025 with industry leaders from a majority of its 51 institutional members.