The top 5 financial services risks over next 12 months, ranked by CROs
A recent survey found that APAC chief risk officers were more likely to identify operational resilience and environmental issues as this year’s leading challenges.
Operational resilience was the most common choice identified by APAC chief risk officers (CROs) as a leading risk over the next 12 months. Sixty-four per cent did so, compared with only 33 per cent at the global level.
Cybersecurity ranked significantly lower in APAC than globally, at 55 per cent and 73 per cent, respectively.
In sharing the results of their research, EY and the Institute of International Finance said the role of the CRO has become “uniquely multi-faceted” – requiring them to consider a wider range of risks from AI and cybersecurity to geopolitics and personnel shortages.
Climate risk and “nature-related” risk management capabilities ranked higher among APAC CROs than they did globally. The same was true for AI and geopolitics.
According to EY, the heightened risk profile of AI among APAC respondents is reflective of talent shortages and skills gaps.
Australia’s digital skills shortage is costing businesses $3.1 billion per year and could be as costly as $16 billion per year by 2030, said the Australian Computer Society (ACS).
“By 2030, we will need 1.3 million additional skills to effectively utilize the technologies reshaping the Australian workforce,” said ACS chief executive Chris Vein.
Last year, Blackline reported that finance and accounting professionals are aware of the need for upskilling but are unable to get there.
Seventy-eight per cent of respondents to the Blackline survey reported difficulties in recruiting and retaining skilled finance and accounting staff while only 35 per cent said their workforces have sufficient data analysis skills.
It is the rate of technological and digital change that is causing APAC CROs to see operational resilience as the top risk this year, said EY APAC financial services risk management leader, David Scott.
“How are FS players adapting to this reality? By boosting their ability to foresee, cope with and bounce back from operational shocks, with a strong emphasis on leveraging technology and more advanced analytics, including the use of AI,” said Scott.
“The focus on technology also highlights concerns over cybersecurity risk, which is always a top area of attention for Asian CROs, just as it is for their global counterparts.”
He added, however, that there are reassuring signs that many financial leaders are implementing technological and personnel transformations.
On the issue of geopolitical risks, Scott pointed to the potential for cyber warfare to ongoing disruptions in global trade as issues CROs are keeping an eye on, both in APAC and globally.
Last year, KPMG reported that Australian financial services firms were most affected by four geopolitical trends: global power realignment, concerns around disinformation and misinformation, a race for tech supremacy, and the geopolitical implications of the climate crisis.
“Financial services companies are being called on to take a stand on controversial issues of social justice, pursue new cyber-enabled opportunities while managing the risks that come with them, and come to grips with the way that climate change is rapidly changing the risk outlook for their clients,” said KPMG.
Since then, the supply chain concerns and new regional conflicts have realigned geopolitical risk profiles.
“Geopolitical risk is an issue that isn’t likely to go away any time soon, so banks in Asia and around the world are keeping a close eye on that because of the different ways it might impact their operations and business going forward,” said Scott.
When asked which emerging risks will be most important for their specific organisations, APAC CRO’s ranked climate and nature-related risks first, at 82 per cent. Machine learning and AI and geopolitical risk came in tied second at 64 per cent.
